The Nigerian Exchange Group (NGX), previously known as the Nigerian Stock Exchange, has acquired an undisclosed equity stake in Ethiopia’s inaugural securities exchange, the Ethiopian Securities Exchange (ESX). This acquisition followed a fundraising initiative that started in mid-2023, collecting 1.51 billion birr ($26.6 million), surpassing the initial goal by an additional 879 million birr ($15.53 million).
The fundraising for the ESX was part of the broader economic reform agenda spearheaded by Prime Minister Abiy Ahmed. This agenda aims to liberalize and modernize Ethiopia’s economy. The ESX had initially aimed to raise 631 million birr ($11.07 million) to initiate its operations, with the ESX planned for a launch later in 2024.
During a press briefing in Addis Ababa, ESX’s CEO, Tilahun Kassahun, expressed his elation over the successful capital raise, which exceeded their expectations. He also stated his optimism regarding the significant confidence investors have shown in the long-term prospects of the ESX.
The government of Ethiopia will maintain a 25% ownership in the Ethiopian Shipping and Logistics Service Enterprise (ESX) via the Ethiopian Investment Holdings (EIH) as well as its subsidiaries which include Ethiotelecom and Commercial Bank of Ethiopia. The balance of the ownership interest, constituting 75%, is set to be allotted to private entities and institutional investors. These proportions are designed to ensure that while private and institutional parties are primarily in control, the Ethiopian government retains a substantial stake in the company through its investment arm and its subsidiaries.
The ESX has reportedly started allocating its shares, marking an important development in its operational setup.
The NGX Group is leading the way as the primary institutional investor, having committed a significant amount of capital for the operation of the securities exchange market. Other notable investors include Financial Sector Deepening Africa (FSD Africa), a non-profit financial institution backed by the UK government and focusing on sub-Saharan Africa. The Trade and Development Bank Group (TDB), the financial subsidiary of the Common Market for Eastern and Southern Africa (COMESA) trade bloc, is also a participant.
Apart from these major investors, numerous local investors have also contributed to the capital raised by the exchange. This includes 16 commercial banks, 12 insurance companies, and 17 individual enterprises.
Kassahun, a spokesperson, emphasized the importance of the strategic foreign investments made by TDB, FSD Africa, and the NGX Group. He noted that these investments allow for the transfer of technical expertise and best practices. In addition, he suggested that there are other areas of long-term strategic value that the ESX intends to explore.
The NGX, which is one of the largest securities exchanges in Africa and boasts a market capitalization of ₦58.66 trillion ($41.8 billion), will lend technical support to the burgeoning ESX. This will cover areas such as exchange structure development, trading rules, and marketing segments, effectively imparting invaluable technical knowledge and best practices.
Thanks to the collaboration with the NGX, the ESX has already managed to establish a set of operational guidelines.
In the country’s struggle to boost foreign investment and expedite its rebuilding efforts following a conflict that lasted two years, the establishment of a securities exchange market is a decisive move. This development aims to diversify the financing sources of the East African nation. Moreover, it seeks to mitigate reliance on conventional borrowing from multilateral and bilateral creditors, as part of Ahmed’s strategic economic initiatives.
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