According to Foresight Africa Series 2019, Africa contributed an annual revenue of $1.2billion to the capital market. This amount, in comparison to the global capital market revenue contribution, is abysmal.
Despite the meager capital market contribution, Africa continues to dominate the world as the continent has the most youthful population in the world, the report says. The youthful population presents important opportunities for businesses in an environment of slow global growth.
Africa has seen a paradigm shift in the frontier of business operations for the past few years, especially in 2020 during the pandemic Brouhaha.
The continent is creating an entirely new developmental path harnessing the potentials of its resources and people, a report from World Bank Group highlighted. Most economies in the Sub-Saharan region swiftly gravitated toward digitalization, a dramatic push from traditional commerce to e-commerce, especially in the financial sector.
Globally, all economies are fiercely pushing to find their feet in the digital ecosystem to broaden their technological and digital horizons to keep up with the ever-changing demands on products and services and in all aspects of the government and corporate world.
Almost 45% of Africans are with smartphones and are on social media yet 85% of the population of 1.216 billion Africans don’t have any idea of what the digital finance industry and online trading is all about.
Reports indicates that 85% of economies are adopting digital currency usage and blockchain technology. African countries like Ghana and Nigeria are frontiers in the digital currency movement.
On the macroeconomic front, digital currency strengthens the control of governments over its currency, facilitates easy cross-border trading transactions, and enhances the formulation of macro and micro economical policies.
Banks are fast drifting towards online banking operations, the digital economy has become the new order, and humans at this point are disadvantaged.
It’s paramount to emphasize that robotics and automatic engineering are taking over human labour in the next few years looking at the fast adaptation of technologies the world over
The big question is why are African governments shying away from the biggest financial industry in the world (foreign exchange market/online trading)?
The Business and Financial Times in their 1st March 2022 report headlined “Regulatory dilemma makes bank of Ghana resolute against cryptocurrencies “, a statement that needs probing as it said a lot about the development of a country’s capital market.
The digital finance industry mostly dominated by the foreign exchange market (online trading) is a non-starter in most African countries. Africa has been tagged as a lucrative destination for foreign investment. A report from forex suggests that even though the whole continent is dealing with economic challenges, growth has been quick and substantial.
Could this be due to a lack of robust regulation framework, lack of technological know-how, or just conservative bias and fear of change?
The Forex Industry released a report stating that the forex market in 2021 is worth $2.409quadrillion with 7.6trillion volumes of daily transactions. Experts say Africa represents the most exciting growth opportunity for international forex brokers.
Brokerage firm such as Geldex Invest is leading the way by massively impacting lives through financial literacy training programmes across the regions in spite of the limitations in the region.
Central banks intervene in the foreign exchange market in order to achieve a variety of overall economic objectives such as controlling inflation, maintaining competitiveness, or maintaining financial stability.
The precise objectives of policy depend on factors including the stage of a country’s development, the degree of financial market development and integration, and a country’s overall vulnerability to shock.
The dynamic of the foreign currency market and deals are quite intriguing as the market dwells on the volatility of securities and Financial instruments and is inherent in some measure of risk. Yet the market also presents interesting risk-return paradoxes that can make any economy profitable indicated by Leonard Oniriuba(Bank of Risk Management in Development Economies 2016).
Although the broader market has experienced a variety of unexpected negative effects due to the COVID-19 pandemic and the Russian Ukraine war, the forex market has remained relatively unscathed. In fact, the volumes of trading increased due to the volatility the pandemic brought on. The increased volatility globally brought a huge amount of opportunities to forex traders.
Banks of international settlement survey 2020 indicated the global gross domestic product (GDP) in 2019 amounted to roughly $142 trillion -meaning turnover of the forex market is almost 17 times larger.
The forex trading market dwarfs even the largest stock exchanges in the world for example the National Association of Securities Dealers (NASDAQ) which has a daily volume averaging around $200 billion.
Over 170 currencies and thousands of stocks, indices, derivatives, etc are traded online on the global forex market. Some forecasts such as IMARC group predicts a compound annual growth rate of 6% in the next 5years globally
Africa is emerging as the new frontier for forex /online trading. With over 41 currencies spread across 51 countries, the continent broad retail and spot forex trading has enormous potential.
Per the Bank of international settlement survey in 2019 on foreign exchange and over a counter market report, South Africa’s forex daily volume was $2.21billion with a total turnover for all forex instruments standing at $21billion. Nigeria’s daily volume stood at $314million whiles Kenya’s daily volume stood at 192.66million, thus making South Africa’s rand rank top of the traded currencies in Africa and 18th globally.
Reports indicated that the retail forex and online market in South Africa rand rocketed from $14billion tog $21billion between 2013 and 2016 and this was attributed to impressive stands and liberal political views on forex matters.
Unfortunately, the online trading and the blockchain technology industry is met with hostility in Africa as it throws governments of their control due to lack of proper fundamental grounding in the capital market.
A robust regulatory and strict licensing regime with massive technical know-how is required to tap into this trillion-dollar industry which currently possesses the ability to save Africa from drowning in unemployment and cyber criminality.
Can we now say a great financial breakthrough found Africa in rather unsettling circumstances?
Article Writer: Gifty Annor-Sika Asantewah
Financial consultant, Geldex lnves
