Despite lower overall scores than previous year, South Africa, Mauritius, and Nigeria held their first, second, and third places in the Absa Africa Financial Markets Index (AFMI) 2021. The Official Monetary and Financial Institutions Forum (OMFIF) collaborates with Absa Group to create the Index.
The attractiveness of financial markets According to data from the Absa Africa Financial Markets Index (AFMI) 2021. Kenya’s financial market attractiveness dropped to 11th place in 2021, down from 7th place in 2020 and 3rd place in 2019, according to data from the Absa Africa Financial Markets Index.
Ethiopia, Africa’s least appealing financial market, was ranked 23rd in the same ranking as 2020. For the first time, Ghana and Uganda in the top five, earning points for improvement in the enforceability of standard master agreements.
Seychelles has experienced a difficult year, with substantial exchange rate fluctuation. It drops five places in the ranking, making it the only country to have low scores in all six pillars.
Kenya received 46 points out of 100 for Market Depth, 45 points for Access to Foreign Exchange, 70 points for Market Transparency, Tax and Regulatory Environment, 24 points for Capacity of Local Investors, Kenya’s lowest score of all the Pillars, 62 points for Macroeconomic Opportunity, and 28 points for Enforceability of Standard Master Agreements.
Products that can be classed as green or sustainable have been introduced in nine nations. Green bonds are the most popular instrument, with exchanges and over-the-counter trading available in seven countries.
In the Market Depth Pillar, Kenya and Morocco received the highest scores for having green or sustainable bonds, shares, and mutual funds in their markets. Kenya has also issued ethical securities in order to fund socially responsible investment possibilities.
Kenya raised $740 million in the 2020/21 fiscal year by issuing a 21-year infrastructure bond. Kenya is also anticipated to begin user testing for its updated central securities depository, which is set to launch in April 2021.
The redesigned CSD will address issues with horizontal repurchase agreements and will allow repos of government securities to be completed in a fully automated manner, considerably contributing to the deepening of the secondary market in major sovereign asset classes.
The CSD technology is being adapted to enable access to all market players, including retail investors, in accordance with Kenya’s aspirations to increase financial inclusion.
According to the AFMI Survey 2021, Central banks are exploring the possibility of issuing central bank digital currencies. Several index countries have initiated research and development projects.
The central banks of Ghana, Kenya, and Rwanda are researching the potential benefits of Central Bank Digital Currencies (CBDC) in promoting payments system efficiency and stability, fostering competition in the financial sector, and boosting economic growth.
CBDC projects are further advanced in Nigeria, Mauritius, and South Africa. The Central Bank of Nigeria announced the engagement of a technical partner for the introduction of its digital currency, called eNaira, later this year.
South Africa recently announced the testing of CBDCs for cross-border payments. In 2020, Mauritius amended its legislation to make the CBDC a legal tender and is now developing legislation to govern virtual assets. Its central bank also developed a licensing structure for custodians and standards for issuing security tokens.