AfDB’s annual workshop on local currency bond markets concludes in Johannesburg
The African Development Bank’s African Financial Markets Initiative held a two-day workshop in Johannesburg, South Africa, recently, where participants from 32 African countries – Central Bank officers, and other stakeholders including regulators, representatives from Ministries of Finance and stock exchanges along with institutional investors – exchanged views on the collection and dissemination of reliable and accurate market data.
The two-day workshop provided the participants with a platform to share experiences the development of debt markets and diversification of the investor base and regulatory environment.
According to Stefan Nalletamby, Director of the AfDB’s Financial Sector Development Department, “Satisfying the ambitious development objectives of Africa as outlined by the AfDB President, Akinwumi Adesina, will require the mobilization of significant domestic resources. The development of efficient local currency debt markets that are liquid and well-regulated, the impact of which will reverberate across the continent, will create alternative sources of financing, reducing the mismatch between sovereign assets and liabilities and thus contributing to stability within the financial system.”
Currently, African debt markets (excluding South Africa) are largely under-developed and dominated by government bonds held by local investors. They are nonetheless undergoing significant growth and show great potential to attract international investors. The realization of this potential depends partially on the elimination of barriers especially those of a regulatory nature that prevent the participation of more diversified group of institutional investors in the markets. The launch of the African Development Bank (AfDB/AFMISM) African Bond Index (ABABI) in February 2015, representing more than 80% of the African debt markets, which will serve as a benchmark for sovereign debt in Africa along with providing transparency, will be a factor in improving the liquidity in the markets.
This 4th pan-African workshop was also an opportunity to highlight progress made towards the launch of the African Domestic Bond Fund. According to the AFMI Coordinator, Cedric Mbeng Mezui, the Fund is a product that will help stimulate investment in local currency debt by international investors. The Fund will help address investor concerns around access to markets, liquidity, risk and market regulation.
In 2008, the African Development Bank (AfDB) launched the African Financial Markets Initiative (AFMI) as part of its strategy to develop the financial sector in Africa. This initiative aims to contribute to the development of domestic bond markets in Africa through its two complementary pillars: i) the African Financial Markets Database (AFMD) and ii) the African Domestic Bond Fund (ADBF). www.africanbondmarkets.org