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West African markets’ integration crucial for growth – Expert

By on June 11, 2015

The integration of capital markets in West Africa has become crucial for raising funds to finance economic activities in the region, the Director-General, Securities and Exchange Commission, Ghana, Dr. Adu Antwi, has said.

He said this in Lagos on Tuesday while presenting a paper on ‘Integrating West African capital markets: Issues, challenges and prospects’ at the 11th Annual PEARL Awards Public Lecture for capital market development.

Antwi, who noted that well-developed capital markets had played an important role in the economic development of many countries, said most African stock exchanges were, however, at their early stages of development and face several constraints.

“Most capital markets in emerging countries like those in West Africa have been described as narrow and illiquid, and discourage investors from investing in these markets,” he said.

He said evidence to support the view that West African stock exchanges were still underdeveloped could be found by considering the few listed companies, low market capitalisation, low liquidity, limited range of investment products, and low level of capital market knowledge among the populace, among others.

According to Antwi, one of the solutions identified to deepen and create more efficient capital markets that promote economic development is regional capital market integration.

This, he said, “is where a number of countries work together to form a common financial market with common rules, cross-border access and increased opportunities for their citizens, investors and stakeholders”.

According to him, in integrated capital markets, capital moves freely across borders and investors and users of capital have the same opportunities within a region, whereas in segmented markets, the capital investment of firms in one country is limited to the savings provided by the country’s consumers.

Antwi, who said efforts to integrate capital markets in West Africa started since 1999, explained that the attempt that year and a subsequent attempt in 2007 had failed to yield the desired results, explained that a third attempt was currently being made to achieve the goal.

He said the current initiative, which started in 2012, had led to the establishment of the West African Capital Markets Integration Council, made up of the DGs of the sub-regions securities commissions and the chief executive officers of the four stock exchanges with observers from The Gambia, Guinea,

Although he explained that WACMIC had been inaugurated in 2013 and that serious progress had been made, including the decision to roll out the integration in three phases, he said the process faced some challenges.

This, he said, included the challenge of converging national objectives with regional aspirations, obtaining political support and buy-in by market operators and other stakeholders.

He said, “From a policymaking perspective, a key issue confronting regional financial cooperation and integration is how best to shape national and regional policies in a way that allows the regions individual economies to maximise the potential gains from financial integration, while at the same time minising exposure to any risks associated with it.”

He also cited the lack of uniform taxation rates and fiscal policies across the region and the absence of a single currency, among others as challenges of integration.

Having noted the challenges, he said the WACMIC was putting in place strategies to tackle and address many of them.

He expressed the confidence that the integration would be successful this time around as its importance and benefits were huge. He also expressed the belief that ECOWAS and all the sub-regional organisations viewed the integration of West African capital markets as a very important tool for the integration of West African economies.

The Chairman of the lecture, Jaiye Randle, who is also the Chairman/Chief Executive Officer of JK Randle Professional Services, said although Africa was abundantly blessed with resources, it had to deliver real value.

Randle, who commended Antwi for the lecture, stressed that there was a need to look at integration from a wider perspective; for instance, to cover issues of security and taxation.

He urged participants and speakers at the lecture to come up with an action plan to facilitate the take-off of the integration.

One of the lead discussants at the lecture and Managing Director/CEO, Abel Sell Nigeria Limited, Mr. Henry Boyo, said care must be taken to ensure that the region does not end up with “a sophisticated supermarket with few goods in it.”

According to him, without an extensive array of equities, the region will end up with a very dry market even if it is integrated.

Boyo explained that there was also the need to consider the monetary factor of inflation and the monetary factor of currency.

He added that the WACMIC should agitate for best practice in the area of inflation rate, by fighting to ensure that inflation remained at best practice levels.

This, he said, was because inflation was capable of reducing disposable incomes and making it impossible for people to invest.

 

[Punch]