As a way of achieving a robust integration for West African economies and finances, 15 Countries are ready to link up their debt markets before the end of 2023.
The Cross-Border Debt Market aim is to open up the debt auctions of each countries to investors from across the Economic Community of West African States, (ECOWAS).
According to the director general of Ghana’s Securities and Exchange Commission, Daniel Tettehin in an interview, “One major advantage is that you get a bigger base of investors bidding for a country’s bonds”.
To allow that to happen, regulators and stock exchanges from across Ecowas are working to put in place a passport system that would allow broker-dealers to trade across the different markets.
“The idea is that by giving member nations access to a wider pool of lenders, they’ll be able to bring down their borrowing costs”.
“The plan is part of a wider drive for greater economic integration by Ecowas, a trading bloc with a combined population of 380 million people”.
The group has been working to set up a common currency — called the eco — for more than two decades, although the pandemic has forced it to push that project back to 2027
Key to the success of the debt-market plan will be making sure that the countries are on an equal footing in terms of systems and processes.
He further stated, “While Nigeria, Ghana and the eight French-speaking members of Ecowas have well-developed stock exchanges and regulatory mechanisms, Liberia, Sierra Leone, Guinea and The Gambia still lag behind.”
The African Development Bank is providing grants to help those countries improve their market infrastructure.
Tetteh added, “The long-term goal is to set up one virtual secondary market for bonds and stocks. Cross-border deals will be done through convertible currencies such as dollars, pounds and euros until the region creates its own common currency”.
According to a data compiled by Bloomberg, prices for the debt of the different Ecowas nations show how much terms of borrowing vary across the region. Yields on government local debt maturing in 10 years range from 5.9% in Ivory Coast and 12.7% in Nigeria to 19.7% in Ghana.