Nigeria’s financial market attraction has advanced to 3rd from 6th spot in the fourth edition of Absa Africa Financial Markets Index 2020 report.
The report which was unveiled by Absa Bank Kenya on Wednesday showed that Nigeria moved from 63 points in 2019 to 65 points out of 100 in 2020. It attributed the two points of advancement to the country’s firm rules set to boost repo and derivatives market.
Nigeria trailed Mauritius which advanced from 75 to 79 points, thus retaining its 2019 2nd position, just as South Africa maintained its 2019 1st position as the topmost country with the capacity to attract local and foreign investment in the continent moving a step further from 88 points in 2019 to 89 in 2020.
This Index according to Absa Bank Kenya, provides stakeholders with an understanding of the strengths and weaknesses of 23 markets and provides countries with metrics that they can use to broaden and deepen their financial markets, making them more attractive to investors.
Highlighting more than 40 indicators for 23 African countries, the report sheds light on the attractiveness of Africa’s capital markets for policymakers, investors and asset managers around the world.
Based on the report, Kenya lost seven points to score 58 out of 100 points, placing Nigeria, Botswana, Namibia and Ghana ahead of Kenya to join South Africa and Mauritius who retained top two positions with 89 and 79 points respectively. Uganda retained its 10th position while Tanzania slipped from seventh to rank 12 as Rwanda also dropped from the ninth position to 13.
Charles Russon, Chief Executive of Absa Corporate and Investment Banking believes that the Index is an important factor in providing transparency and encouraging investment to support Africa’s growth.
The Absa index creates a means for cross country comparisons, opening policy discussions between regulators, capital markets, investors and corporates on how to build markets that can mobilize capital and promote investment.
Countries are rated based on six pillars, which includes market depth, access to foreign exchange, market transparency, tax and regulatory environment, the capacity of local investors, macroeconomic opportunity as well as legality and enforceability of standard financial markets master agreements.
The foreign exchange rating is based on a country’s openness to foreign investment in regards to the ease of moving capital, the flexibility of foreign exchange regimes and the availability of reliable foreign exchange data. In this category, Nigeria dropped positions, with its foreign exchange regime coming into focus again. It had the lowest ranking at 22 points on foreign exchange pillars in comparison to South Africa’s 80 points condemning to bottom position in this pillar.
Looking at the market depth category, there was respite as the country took the second position despite the impact of COVID-19 on Nigerian Securities Exchange market capitalization and activity.
The country also placed 3rd, trailing South Africa while Mauritius came tops in the legality and enforceability of standard financial markets pillar among others.