West Africa capital markets integration moves closer

Integration of capital markets in the West African sub-region has inched a step closer with the approval for brokers in the member-countries to start drawing up partnership agreements that will enable them to trade across markets.

The Integration Council of the member-countries -- made up of Ghana, Nigeria, Sierra Leone and the Bourse Regionale des Valeurs Mobilieres (BVRM), which features eight Francophone countries -- gave the approval to fast-track the integration process.

“We are supposed to get to the first stage -- which is sponsored access. We have gotten there, so at our last meeting in Cote d’Ivoire in March we encouraged operators to start arranging their own agreements. An operator in Ghana can have an agreement with an operator in Nigeria so that this operator can trade on the Nigeria stock market through the Nigeria broker and vice versa,” Adu Anane Antwi, Director-General of the Securities and Exchange Commission told the B&FT.

“It is now for the brokers to have those agreements among themselves, then the regulators will have a look at the agreements and approve for them to start. So for now, any broker who is interested in having a relationship with a West African broker at either the Abidjan or Nigeria stock market is allowed to do the agreements and be able to trade through each other,” he added.

The drying-up of external sources of capital and relentlessly narrow domestic pool of savings have made it imperative for member-countries to put their shoulders to the wheel and help realise the much-touted integration that was started some seven years ago.

The inability of governments in the sub-region to finance growing infrastructural requirements in the sub-region -- mainly in the areas of transport, housing, power -- from their over-stretched budgets has made the integration of capital market in the region crucial for raising funds to finance infrastructure.

The integration process is however fraught with many challenges. The level of technological differences among member-states and the absence of a common currency to facilitate trade are but a few. Attempts by member-countries of the West Africa Monetary Zone (WAMZ) to create a second monetary union in the West African sub-region by 2015 have been saddled with missed convergence criteria targets.

The common currency -- the ECO -- for the sub-region is now a long way from being achieved, a situation that has raised concerns about its impact on attempts to integrate capital markets in the sub-region.

None of the six countries in the largely English-speaking West Africa Monetary Zone (WAMZ) -- Ghana, Guinea, Nigeria, Sierra Leone, The Gambia and Liberia -- has since the common-currency dream was formulated in 2000 been able to meet the four primary and six secondary convergence criteria required for its introduction.

Mr. Antwi however believes that capital markets integration can be achieved without full implementation of the common currency.

“Of course, there are technological issues involved. If you are in Ghana and you want to route your trade through a Nigerian broker, your IT person should be able to speak to his Nigerian counterpart to sort out any differences. This is one of the things that the brokers need to sort out before they come out to say they have an agreement.

“The idea of one common currency is key. You can easily integrate your markets if you have a common currency. If I put ECO in my account and you are using the same ECO to pay the Nigerian seller, we don’t have a problem. These are issues that we need to work on, but that wouldn’t stop us from integrating out West African capital markets.

“We will go ahead; settlements will be done, and the banks will help. We have to make sure that our currencies are able to be transferred across borders. There are already structures in place to help us do this.”