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Integrating West Africa’s capital market

Every college student knows that the West African sub region has the largest number of people than can be found on any other part of the continent. With an estimated population of 300 million and land area of 5,112,903km sq, West Africa enjoys some unique natural advantages rarely found elsewhere. Unfortunately, the sub-region is yet to leverage on its comparative advantage to integrate the  citizens and  economy.  This is made worse by the fact that since 1975 when the Economic Community of West African States (ECOWAS) was established, the objectives are yet to be fully realised.

There is no gainsaying that the region’s fragmented capital market has been responsible for the non-existence of a vibrant monetary system capable of delivering economic prosperity for the people. That is why the call by Chairman, Securities and Exchange Commission (SEC), Dr. Suleiman Ndanusa for capital market integration in order to tackle regional challenges and create a larger market for local and international businesses is most welcome.

“Integrating West Africa capital markets will not only empower us as a more formidable competitor to other emerging markets but also help tackle the challenges of depth, breadth and liquidity,” he said.

It would be recalled that most regions of the world have for long embarked on capital market integration in order to take advantage of economies of scale such offers.

Institutions like the European Union (EU) and North American Free Trade Association (NAFTA) are responsible for the economic prosperity of member states. It is a fact that financial integration allows for the elimination of restrictions pertaining to cross -border financial operations which in return enables related institutions to operate freely.

It also allows businesses to directly raise or borrow funds, while making it easier for equity and bond investors to invest across the state line with fewer restrictions. Unfortunately, West African has for long relied on investors from outside the region to drive economic growth. It is even more painful when it is realised that the regional trade among member states has remained low due to fragmented capital markets.

It is worth rehashing that the benefits of financial integration include efficient capital allocation, better governance, higher investment, growth and risk sharing. With financial integration, efficiency gains can also be generated among domestic firms since they have to compete directly with foreign rivals, thereby leading to better corporate governance.

Over all, Nigeria being the region’s biggest economy and Africa as a whole stands to benefit tremendously, especially in the area of direct investment in other ECOWAS countries.

Such integration would help the country diversify from an oil-based economy and thereby reduce macroeconomic volatility. That is why Ndanusa’s observation that integration would usher in a wave of product innovation as expertise is utilised from across the region is very apt.

West Africa must seize this golden opportunity if ever it is to develop like its contemporaries in other parts of the world.

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