African financial markets are making gradual progress in their ability to mobilise capital for businesses and infrastructure, but limited trading activity continues to restrict their capacity to attract investment and finance long-term development, according to the 2026 Africa Financial Markets Index published by Absa Bank and the Official Monetary and Financial Institutions Forum (OMFIF). Released in October, the index found that 21 of the 29 countries assessed improved their scores, while the continent’s average score reached 56, its highest level in a decade.
The findings point to a persistent gap between financial market development and the availability of capital at the scale required to support economic transformation. Although regulatory reforms, easing inflation and stronger foreign exchange reserves have helped improve market conditions in several countries, the report found that the expansion of financial products and market infrastructure has not consistently translated into greater trading activity.
According to Reuters, the index assesses countries on their ability to raise and move capital, considering stock and bond markets, access to foreign currency, pension savings, economic conditions and regulation. These factors influence whether companies and governments can raise funding beyond traditional bank lending and whether investors can buy and sell financial assets without excessive difficulty or cost.
South Africa retained the highest position in the index, followed by Mauritius and Namibia. Cape Verde recorded the largest improvement, rising six places to 13th, supported by stronger foreign exchange reserves and new sustainable finance initiatives. Ghana climbed four places to sixth as falling inflation, increased stock market activity and improving economic conditions supported its recovery from a debt crisis. By contrast, Botswana and Nigeria each fell two places, to seventh and eighth respectively. Nigeria’s position was affected by weaker foreign exchange access and transparency scores, while rising inflation weighed on Botswana.
The results matter for Africa’s development financing needs, which extend beyond the capacity of governments to borrow or banks to extend credit. Expanding financial markets can provide businesses with additional ways to raise equity and issue debt, while allowing pension funds, insurers and other institutional investors to channel domestic savings into productive assets. However, these mechanisms depend on investors being able to enter and exit markets at reasonable cost, with sufficient information and confidence in the underlying assets.
Liquidity is therefore central to the relationship between market reform and investment. A market may have stock exchanges, bond listings and a range of financial products, but if transactions remain infrequent, investors can struggle to buy or sell securities at predictable prices. This can increase the perceived risk of holding assets, discourage participation and make it more difficult for companies to raise capital on favourable terms.
For infrastructure investment, the consequences can be significant. African economies need long-term funding for electricity generation and transmission, transport networks, water systems and urban services. These projects often require substantial upfront expenditure and generate returns over many years. Deeper domestic capital markets could help governments and project developers access longer-term finance while reducing exclusive reliance on commercial bank lending, public budgets or external capital.
The same financing challenge applies to the continent’s energy transition. Renewable energy facilities, electricity storage, grid upgrades and climate-resilient infrastructure require capital that can remain invested over extended periods. Where local bond markets are shallow or secondary trading is limited, project developers may find it harder to secure suitable domestic financing, while pension funds and other institutional investors may face constraints in allocating capital to infrastructure assets.
Nevertheless, improved market scores should not be interpreted as evidence that sustainable investment is already increasing at the same pace. The index measures financial market development and enabling conditions; it does not, by itself, establish how much additional capital is reaching renewable energy, climate adaptation or other sustainability-related projects. The practical impact will depend on whether stronger markets expand the pool of available finance and whether investment frameworks direct capital towards economically viable projects with credible environmental and social safeguards.
Cape Verde’s progress is notable in this context because Reuters linked its improved ranking partly to new sustainable finance initiatives. Such measures can help connect financial market development with environmental priorities, although the broader effectiveness of these instruments depends on transparent eligibility criteria, reliable reporting and evidence of how proceeds are used. Without these safeguards, sustainability-related financial products risk offering limited assurance about the outcomes they claim to support.
Governance and transparency also remain important to investor confidence. Clear regulations, consistent disclosure requirements, reliable market data and effective oversight can reduce uncertainty for domestic and international investors. In markets where information is limited or foreign exchange access is difficult, even attractive investment opportunities may struggle to draw sufficient capital. Nigeria’s lower scores in foreign exchange access and transparency illustrate how financial market performance can be shaped by institutional and macroeconomic conditions as well as the availability of financial products.
The wider economic environment adds another layer of risk. The index report highlighted global trade tensions, conflicts in Ukraine and the Middle East, elevated energy costs and the possibility of a strong El Niño event as pressures that could undermine economic stability across Africa. These factors can affect inflation, exchange rates, public borrowing costs and investor sentiment. For governments already balancing debt obligations against development spending, renewed economic volatility could further constrain the resources available for infrastructure and climate-related investment.
The report also points to the importance of domestic savings. Pension funds and other institutional investors can provide a potential source of long-term capital, but mobilising those funds requires suitable investment instruments, credible regulation and markets with sufficient depth. A broader range of assets alone will not ensure that savings flow into productive projects if investors cannot assess risks accurately or trade their holdings efficiently.
For policymakers, the challenge is to turn improvements in market infrastructure and regulation into sustained participation by investors and issuers. This includes strengthening transparency, improving foreign exchange access, supporting the development of bond and equity markets, and ensuring that financial products meet the needs of businesses seeking long-term funding. It also requires maintaining macroeconomic stability, since inflation and currency uncertainty can weaken confidence even where regulatory systems improve.
For African businesses and communities, the significance of stronger capital markets ultimately lies in whether they expand access to finance for productive activity, employment and essential infrastructure. A company’s ability to raise capital can influence whether it expands operations, invests in cleaner technology or develops new products. Similarly, the availability of long-term finance can determine whether infrastructure projects move from planning to implementation.
The 2026 index suggests that African financial markets are advancing, but the persistence of low liquidity highlights the limits of progress measured primarily through institutional and structural improvements. Converting stronger market conditions into sustainable economic investment will require deeper trading activity, greater transparency and financing instruments that connect domestic savings with credible long-term projects. Until these conditions improve more consistently, the continent’s financial markets may remain less effective than their growing range of products and reforms would suggest in financing the infrastructure and transition priorities facing African economies.
