How African stock exchanges can increase liquidity, attract global capital

Investors eyeing African stock markets are in for a lucrative ride as market capitalization is set to soar with the expansion of the African Exchanges Linkage Project. With plans to increase the number of exchanges from 8 to 15 by the end of 2025, investors could gain access to 1,500 securities with a market capitalization exceeding $1.5 trillion. In a recent interview with CNBC Africa, Lina Tonui, Project Lead of the African Exchanges Linkage Project, shed light on the significant progress made in interconnecting seven major exchanges across the continent. These exchanges include the Nairobi Securities Exchange, Johannesburg Stock Exchange, Casablanca Stock Exchange, Nigerian Stock Exchange, Stock Exchange of Mauritius, Egyptian Exchange, and BRVM representing the Francophone West Africa. By facilitating connectivity between exchanges and investors, the project has opened doors to cross-border trading and diverse investment opportunities across Africa and globally. Each market offers a unique array of products, attracting investors with the potential to diversify their portfolios. For instance, the Nairobi Securities Exchange features investments like Safaricom, while the Nigerian Exchange offers opportunities in companies like Dangote Cement. These exchanges collectively represent about 90% of Africa's capital markets, providing access to over 1,500 securities and a market capitalization of $1.5 trillion. The significance of this project extends beyond financial gains, as it fosters innovation and inclusivity in the African stock market landscape. Amid challenges posed by the COVID-19 pandemic and perceptions of elitism in trading, the project aims to onboard more exchanges to enhance market connectivity. While currently including eight countries, the initiative targets the integration of additional exchanges to achieve a more robust and inclusive linkage. The Botswana Stock Exchange and Ghana Stock Exchange are set to join the platform soon, bringing the total connected exchanges to nine. By 2025, the project aims to onboard a total of 15 exchanges, encompassing half of the African Securities Exchanges Association's members. Collaboration with regional and Pan-African institutions like the African Union Commission and the African Continental Free Trade Area (AfCFTA) plays a crucial role in advancing the project's objectives. Through harmonizing infrastructure, promoting efficiency, and enhancing product development, the project strives to make African capital markets more accessible and competitive. The project also envisions facilitating cross-border initial public offerings (IPOs) to enable entities to list and raise capital across the continent. Working with stakeholders to remove barriers to cross-border trading, the project seeks to position African stock exchanges as key players in the global market and attract substantial capital inflows to drive economic growth and development across the continent.