Ghana’s financial markets deepen amid tough backdrop

Ghana’s financial sector has improved more than that of any other country on the continent over the last year.


Image : Nataly Reinch/

Ghana’s financial development has improved more than any other country on the continent in the last year, according to an annual review of Africa’s financial markets.

The Absa Africa Financial Markets Index found that Ghana edged out Morocco and the Seychelles as the country whose standing improved the most from last year as it moved up seven places in the ranking to 6th overall.

Morocco and Seychelles rose by 5 and 4 places respectively. South Africa and Mauritius held the top spots for another year, with Nigeria taking third after a rise of three places following reforms to boost its repo and derivatives markets.

Underpinned by an active foreign exchange market and a stronger legal framework, Ghana’s overall score rose from 50 out of 100 in 2019 to 59 in 2020. The adoption of reforms helped Ghana climb five places when ranked by the legality and enforceability of financial markets master agreements.

The report found that the country offers generous tax rates to investors of around 8% for interest and dividends compared to over 20% for Zambia – helping Ghana achieve a score of 83 for market transparency, tax and the regulatory environment.

Nevertheless, the country still has significant room for improvement. Ghana scored just 27 for the capacity of local investors, 48 for market development and 54 for access to foreign exchange.

Coronavirus has offered a fresh challenge for countries aiming to deepen their financial markets, with the initial impact felt by those with high levels of external debt as global investors pulled back investments. The withdrawal of international capital impacted the region’s stock markets as liquidity dropped in the first half of 2020, according to the report.

Nevertheless, the general trend is one of improvement throughout Africa. When the index was first released in 2017, only three out of 17 countries scored above 50. This year, 11 out of 23 countries scored above 50, driven by stronger legal frameworks and growing local investor capacity. The top three countries – South Africa, Mauritius and Nigeria – all improved their overall score from last year.

“During a difficult year, African countries are facing enormous challenges from Covid-19. As the health crisis persists, the resilience of financial systems in every economy is being tested. Financial markets have been disrupted, but expansion and innovation in recent years will benefit the rebound and recovery process,” said the report.

“Central banks and financial policy-makers have responded by supporting local debt markets with a variety of tools, earning praise from individuals and institutions that participated in this year’s survey. While the longer-term outlook largely relies on the extent to which activity could resume in the local and global economy, recent progress in financial market development will only serve to improve Africa’s chances of having a rapid and sustainable recovery,”  it stated.

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