By Goddy Egene
The President, African Securities Exchanges Association (ASEA) and Chief Executive Officer, Nigerian Stock Exchange, Mr. Oscar Onyema has called on African Countries to deepen their capital markets so as to facilitate the raising of $3.1 billion by companies in 2016.
Speaking at the Building African Financial Markets (BAFM) seminar in Lagos, Onyema said research by Thomson Reuters indicated that African initial public offerings(IPOs) are to raise over $3.1 billion in 2016. The amount does not only double what was raised in 2015 but also it is the highest value raised in any year since 2010.
Technology, consumer essentials and industrial sectors are set to be the busiest among the 15 IPOs in the African pipeline.
‘Now, what does this mean for us? It means that we must position African capital markets as a viable funding source for the anticipated growth, and liquidity is the key success factor to this goal,” he said.
According to Onyema, sub-regional integration efforts such as WACMI in West Africa, CoSSE in Southern Africa, and EAC in East Africa are important initiatives that have the potential to unlock demand among issuers and boost liquidity.
“The African Exchanges Linkage Project (AELP), which is a jointly owned mandate between ASEA and the Africa Development Bank (AfDB), is also aimed at addressing the lack of liquidity in African capital markets. Thus, these initiatives are encouraged to fast-track the integration of their regional markets,” he said.
Onyema noted that like integration, technology has become a facilitator of liquidity. “Historically, the technology focus for exchanges was on execution, however today, the focus has shifted to information services, pre-trade, and post trade dimensions. Accordingly, information services, pre-trade and post-trade are where the next waves of innovation for exchanges are expected to emerge. Emerging technology such as block chain and fintech are gaining traction. Business models such as Uber and Airbnb who have no taxis or rooms but yet create liquidity in them, demonstrate that technology does not create liquidity on its own but instead it brings together market participants, and that leads to liquidity,” he said.
According to him, in the capital markets, technology can be powerful, as it can bring very diverse market participants.
“Building the African financial market is our collective responsibility hence we must seek out knowledge that empower each of us to remove impediments such as outdated systems and trading practices that impede the ability of African exchanges to handle sizeable capital inflows. Evolution in local regulation is starting to increasingly provide the opportunity for pension funds to diversify their expanding portfolios beyond equity investments in traditional sectors, such as banking and oil & gas availing additional pools of funds to be traded in our markets. These and many more are some of the untapped opportunities waiting to be explored, and it is imperative that we are prepared to take advantage of these opportunities. Luck they say is what happens when preparation meets opportunity. Therefore, let us create and take ownership of our own luck, by engaging and participating in this rich seminar, and then proceed to leverage the knowledge in innovating, and enhancing efficiencies in our different capital markets,” he said.