The National Bank of Ethiopia (NBE) which has reintroduced the primary money market a couple of weeks ago announced it would commence the highly anticipated secondary market in May 2020.
The government announced that it would start the stock market by 2020 without giving a specific time frame.
Ethiopia actually had a stock marked before most other African countries, (around 60 years ago) but when the Derg took over that stopped.
Yinager Dessie, Governor of NBE, told Capital that the central bank is preparing the document to table it to the Council of Ministers in the near future.
Currently finance is only accessible in a primary market that is directly related with banks for the private and public sector or through treasury bills (T bill) for the government.
“Capital market is another source of finance that is separate from banks and currently in the process to commence from initial stages,” Yinager says “for instance three weeks ago the T bill has recommenced with the aim to attract private banks and other private sector players and to make a transition for the biggest market.”
“Based on our observation the beginning is very good that is good step to move to the secondary market.”
He said that according to the NBE target, the secondary market will begin by May 2020, but it depends on the cabinet decision at the federal government.
“The legal framework is under development and skilled professionals are being prepared, while preconditions are in the process and in the coming few months we will commence it,” he explained.
“The final go ahead will depend on the Council of Ministers’ decision,” he added.
According to the governor, the central bank will deliver the draft document to the council that will decide whether the business would be started by regulation or proclamation.
If the council of Ministers’ approve it as a regulation the starting time will come soon, but if the council decides the law should be ratified as a proclamation it would be sent to the parliament.
“As per our evaluation the T bill average interest rate offer that banks participate in the auction is attractive and reasonable,” he said.
Most of them offer about 7.5 percent to 8.5 percent but some of the banks offer up to 15 and 16 percent at the auction, according to Yinager.
“Most of the offers that come from the banks at the auction is very encouraging,” he said.
“This will show us what the market interest rate should be. When the market goes up and people understand how to use it the capital market structure will improve,” he added.
Recently NBE stopped the NBE bill directive enforcing banks to buy 27 percent of bonds from every loan that they disbursed for clients. NBE has reintroduced the weekly T bill with an attractive interest rate to attract banks and other interested players.
International partners like the World Bank are providing technical and others support to commence the stock market.
Currently the country’s finance accessibility is very poor; most of the citizens are not benefiting particularly from the loans.
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