The Ghana Stock Exchange (GSE) is making strategic moves to attract significant investment from Nigerian pension funds, alongside its efforts to mobilize funds from Ghanaian and other African pension funds.
Abena Amoah, the Managing Director of GSE, highlighted these ambitions during the Building African Financial Markets Seminar in South Africa, themed “Navigating New Horizons: Evolving African Financial Markets.”
As of January 2024, Nigerian pension funds held a substantial value of $14.39 billion. In comparison, Ghana boasts investable pension funds amounting to GHS 50 billion ($3.29 billion). The GSE is keen to channel a portion of these funds into the local bourse to bolster economic growth and corporate expansion.
Ms. Amoah emphasized that the integration of pension fund assets into the equity market has seen significant growth.
“Two years ago, pension fund assets in our equity market were less than 2%. Today, that figure has risen to almost 10%. We are working diligently to increase the share of pension fund assets in the coming years.”
Ms. Amoah
Strategic Engagement with Pension Funds
The GSE’s strategy includes engaging pension funds through training and introducing diverse asset classes such as natural resources (gold, lithium, salt) and manufacturing companies.
This approach aims to showcase the potential for deploying capital into various sectors of the economy. “Pension fund money is 30-year money; it’s patient capital, and that’s the type of money we need to invest in the real sector of the economy,” Ms. Amoah explained.
In addition to local efforts, the GSE is casting a wider net by seeking investments from Nigerian and other African pension funds, as well as global investors. This regional focus underscores the GSE’s ambition to become a central hub for investment across the continent.
Despite the availability of pension funds, Ms. Amoah noted a reluctance among companies to tap into this capital. “Our biggest challenge is finding companies to step up and take the capital. There’s capital looking for investment opportunities, but few companies are stepping up for it,” she said.
This hesitation is attributed to macroeconomic challenges such as high inflation, high-interest rates, and exchange rate volatility, which have made many companies adopt a cautious approach.
To address these issues, the GSE has introduced new financing options, including the Commercial Paper Market, to provide a broader suite of financial instruments for companies. This initiative is designed to offer more flexibility and encourage companies to seek funding for growth and expansion.
Market Recovery and Growth
The GSE has begun to witness signs of recovery in its main equities market, which had been adversely affected by the domestic debt restructuring program. This recovery is partly driven by the ongoing government’s external debt restructuring efforts.
Ms. Amoah highlighted that the GSE equity market has shown bullish trends this year, with the Composite Index recording over 20% year-to-date returns for investors.
The current market capitalization of the GSE stands at GHS 84.38 billion, reflecting a robust and recovering market environment. This positive momentum is crucial for attracting more pension fund investments and providing the necessary capital for companies to thrive.
The GSE’s proactive approach in engaging with pension funds and expanding its reach to include Nigerian and other African pension funds marks a significant step towards strengthening the local bourse. By providing patient capital, the GSE aims to support long-term investments in critical sectors of the economy, fostering growth and development.
However, the success of these efforts hinges on overcoming macroeconomic challenges and encouraging more companies to take advantage of the available capital.
With a diverse range of financing options and a recovering market, the GSE is well-positioned to play a pivotal role in the economic transformation of Ghana and the broader African region.
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