Ecowas explores integration of capital markets

The headquarters of the Nigerian Stock Exchange in Lagos 

Ecowas region capital markets are seeking to integrate by the first quarter of 2016.

The rationale is that integration will not only strengthen the West African capital markets vis-à-vis other emerging markets, but will also tackle the challenge of depth and market liquidity.

The integration would help create a bigger market for both local and foreign investors.

Representatives of capital markets from the 15 Ecowas member countries meeting in Abuja, Nigeria, are reviewing the progress so far made in the integration so as to find solutions to the impediments to the initiative.

The meeting is also considering the reports on the acceptability of foreign-held securities as collateral for bank loans; double taxation; and the report on the guidelines for capital raising across the sub-region

The chairman of Nigeria's Securities and Exchange Commission, Suleyman Ndanusa, explained that there are three phases required for capital markets integration.

The are direct access market phase, qualified West African stockbroker phase and capital market phase, which is the ultimate step.

“According to the timetable, by the end of 2015, we should have substantially gone through all the stages. We have three stages and we attained stage one in April 2014. We are working towards stages two and three,” he said.

“So obviously, latest by the first quarter of 2016, we should have attained the three stages for integrating the capital markets in West Africa.”

Financing challenge

The West African Monetary Union is working out the effectiveness and smoothness of the integration in a region that has no single currency except in the French-speaking countries.

“There is a technical committee made up of the central banks working on this issue,” said Mr Ndanusa.

"We are working with the ministries of finance, and so by the time we get to the level of full integration, that issue would have been resolved,” he added.

The chief executive officer of the Nigerian Stock Exchange explained that with a population of over 300 million people, combined Gross Domestic Product of $600 billion and a landmass bigger than the European Union, the sub-region would witness improvement in its GDP.

He listed some of the impediments of integration as company law issues, free movement of foreign exchange across the sub-region and free movement of people.

“We also have technical challenges such as harmonisation of rules, and we are benchmarking all of these rules with global best standards. But for us, the biggest challenge is financing in terms of how do we pay for all of these,” he added.

The integration of the capital markets could be another white elephant after the much touted common currency, eko, failed to take off. Its implementation has faced numerous postponements with latest date now fixed fine 2020.

The year fixed for the actualisation of the common currency was approved by West African Monetary Zone at a meeting also held in Abuja in July 2014.

The deadline for the implementation of the common currency project was January 1, 2015, but this had to be shifted to 2020 as the English speaking countries in the bloc don’t have a common currency like CFA franc of their French-speaking counterparts.

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