Ghana’s financial market places 6th out of 23 countries according to the Africa Financial Markets Index 2020 produced by Official Monetary and Financial Institutions Forum (OMFIF), an independent think tank for central banking, economic policy and public investment in association with Absa Group Limited.
This milestone is on the back of an “active foreign exchange market and stronger legal framework” moving Ghana seven steps up from 13th position recorded in 2019 to 6th position this year and with an accompanying increase in scores from 50 last year to 59 in 2020, implying a remarkable development in the Country’s financial markets over the years.
Top five countries on the list were South Africa, Mauritius, Nigeria, Botswana, Namibia respectively, in order of their position.
Using data from central banks, securities exchanges and international financial institutions in conducting the research, and assessing countries according to six pillars namely ‘market depth; access to foreign exchange; market transparency, tax and regulatory environment; capacity of local investors; macroeconomic opportunity; legality and enforceability of financial contracts, collateral positions and insolvency frameworks,’ Ghana’s scores in summary out of 100 were 48, 54, 83,27,65, and 78 respectively, in that order for the various pillars.
Delineating some plans that the central bank has put in place to boost Ghana’s international market, the First Deputy Governor of the Bank of Ghana, Dr. Maxwell Opoku Afare, intimated that “Once we firm up on the reporting of the new general based trading regime, the Bank of Ghana will actively engage other stakeholders to begin the process and consultations towards the adoption and implementation of another important master agreement which is the Global Master Securities Lending Agreement (GMSLA). We would also work towards linking the central securities depository to other international clearing platforms like Euroclear. We believe these reforms will further strengthen Ghana as a training hub and champion of the AfCFTA agenda.”
The Africa Financial Markets Index is organized annually by Absa Group and this year happens to be the 4th edition since its inception in the year 2017.
“In this landmark year, we are proud to partner once again with OMFIF in releasing the fourth edition of the Afmi. We are particularly pleased that this 2020 edition adds a further three markets, taking the total to 23 countries evaluated, further expanding our coverage of Africa’s financial markets”.
Delving into the methodology adopted in assessing countries based on the six pillars, the ‘Market depth’ pillar considers the size and liquidity of financial markets, as well as the diversity of products available. Overall performance, however, deteriorated, partly because of the impact of Covid-19 on market capitalisation and activity. Ghana made it to the 6th position.
According to the report, Ghana rises the most in pillar 2 ‘Access to foreign exchange,’ ranking 12th with its foreign exchange liquidity increasing, as measured by interbank foreign exchange turnover. This pillar evaluates African markets’ openness to foreign investment based on the ease of moving capital, liquidity of foreign exchange markets, rigidity of foreign exchange regimes and availability of reliable foreign exchange data.
Collectively, most countries perform best in the ‘Market transparency, tax and regulatory environment’ pillar which scores countries based on regulatory frameworks, tax systems and market transparency. Ghana took the 4th position, maintaining its strong performance because of a supportive tax system.
The ‘Capacity of local investors’ pillar measures local investor capacity based on the amount of pension fund assets available in the country relative to the population and market capitalization. Ghana made it to the 11th position for this pillar.
Also, the ‘Macroeconomic opportunity’ pillar evaluates a countries’ macroeconomic performance, export competitiveness and banking sector health taking into consideration the quality of governance based on external debt management and financial sector transparency. Ghana placed number 14 on the list.
Ghana climbs five places to rank 5th in pillar 6 which is ‘Legality and enforceability of standard financial markets master agreements,’ the report mentioned. This pillar emphasizes on strong legal frameworks, clear rules on property rights and the recognition of internationally accepted legal standards building an attractive investment environment.
In conclusion the report posits that “the countries whose standing improved the most from last year are Ghana, Morocco and Seychelles. Firmer rules enforcing close-out netting boosted Ghana’s standing”.
