The news:
- The Nigerian Exchange Group (NGX), formerly the Nigerian Stock Exchange, has bought a stake in Ethiopia’s first-ever securities exchange for an undisclosed amount.
- The fundraising effort, which began in mid-2023, has resulted in 1.51 billion birr ($26.6 million), exceeding the initial target by 879 million birr ($15.53 million).
- In line with the broader economic reform agenda by Prime Minister (PM) Abiy Ahmed to liberalise and modernise the Horn of Africa nation’s economy, the Ethiopian Securities Exchange (ESX) set out to raise 631 million birr ($11.07 million) to kick off operations.
The ESX is scheduled to launch later in 2024.
The ESX”s CEO, Tilahun Kassahun, announced the development during a press briefing in Addis Ababa, Ethiopia.
“We are thrilled to have exceeded all our expectations in terms of the capital raise and are excited by the overwhelming confidence shown by investors in the long-term prospects of both ESX,” Kassahun said.
The Ethiopian government will retain a 25% stake in the ESX via Ethiopian Investment Holdings (EIH) and its subsidiaries, Ethiotelecom and Commercial Bank of Ethiopia. The remaining 75% ownership interest will be distributed to private and institutional investors.
The ESX reportedly allocates the shares, an essential next step in its operational setup.
The NGX ranks first among institutional investors who have committed capital to the operation of the securities exchange market.
Others include Financial Sector Deepening Africa (FSD Africa), a UK-backed sub-Saharan Africa-focused non-profit financial institution, and Trade and Development Bank Group (TDB), the financial subsidiary of the Common Market for Eastern and Southern Africa (COMESA) trade block.
In addition to the top bidders, the exchange completed the capital raise with capital injections from local investors, which included 16 commercial banks, 12 insurance companies, and 17 private entities.
Kassahun stated, “Strategic foreign investments by TDB, FSD Africa, and NGX Group are significant in allowing the transfer of technical know-how and best practices, as well as other areas of long-term strategic value that we will explore.”
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The NGX, one of the largest securities exchanges in Africa, boasting a market capitalisation of ₦58.66 trillion ($41.8 billion), will provide the ESX with technical support, such as technical know-how and best practices, in developing the exchange structure, trading rules, and marketing segments.
Because it collaborated with the NGX, the emerging exchange has already been able to create a set of regulations to guide its operations.
As Ahmed seeks to increase foreign investment in the nation and accelerate its reconstruction efforts following a two-year conflict, the setting up of a securities exchange market marks a strategic move to not only diversify the East African country’s funding sources but also to reduce dependency on traditional borrowing from multilateral and bilateral creditors.
