Here’s what to know as Ethiopia rings first Exchange bell in over 50 years

Recently, Ethiopia launched its first Stock Exchange in over 50 years as the country moves to open its tightly controlled economy to private investment.

In April 2024, Nigerian Exchange Group Plc (NGX Group) invested significantly in the Ethiopian Securities Exchange (ESX) which was established in October 2023.

ESX concluded its capital-raising exercise in April 2024, achieving more than double the funds needed to commence operations.

As a leading integrated market infrastructure group in Africa, NGX Group is among the top institutional investors that injected capital into the operationalisation of ESX alongside FSD Africa, a UK-backed non-profit financial institution, and Trade and Development Bank Group (TDB), the financial arm of the Common Market for Eastern and Southern Africa (COMESA) trade block.

Ethiopia, Africa’s second most populous country with around 130 million people, had a securities exchange in the 1960s and 70s, but it was abolished by the socialist military government that overthrew the monarchy in 1974.

“In a historic milestone for our economic and financial landscape, we have officially rung the bell to launch the Ethiopian Securities Exchange,” Prime Minister Abiy Ahmed said in a post on the X platform.

Through a public-private partnership, the ESX has the EIH as its founding shareholder, representing the government’s interests. Also, 16 domestic private commercial banks, 12 private insurance companies, and 17 other private domestic investors have also invested in the exchange.

The Ethiopian Securities Exchange ownership structure mandates that up to 25 percent of the shares be held publicly, while the remaining 75 percent is reserved for private investors.

The ESX is expected to operate from 9am to 3 pm each week day.

With the ESX poised to redefine Ethiopia’s financial landscape, NGX Group’s involvement highlights the critical role of partnerships and shared expertise in advancing Africa’s economic narrative.

The pivotal move last year not only marked NGX Group’s entry into East Africa but also underscored its commitment to driving growth and innovation in the African capital markets, while strategically positioning itself as the largest foreign institutional investor in the ESX.

The investment in the Ethiopian Stock Exchange reflects NGX Group’s confidence in the potential of Ethiopia’s rapidly growing economy and capital market. By partnering with ESX, NGX Group aims to support the development of a vibrant and resilient financial ecosystem in Ethiopia, fostering increased investor participation and capital formation.

As at the time of the launch of ESX, just one company, Wegagen Bank, was initially listed on the Ethiopian Security Exchange (ESX), though Tilahun Esmael Kassahun, ESX chief executive said he expected 90 companies to eventually join over the next 10 years. State-owned telecom Ethio Telecom, which is preparing for an initial public offering, is also widely expected to list shares on the exchange.

Tilahun Esmael Kassahun, CEO of the Ethiopian Securities Exchange, expressed confidence in the partnership with NGX Group. “We are pleased to welcome NGX Group as a strategic partner, building upon the existing support we continue to receive from them,” he said. Kassahun also emphasized the value of NGX Group’s expertise in shaping ESX’s growth and success.

NGX Group, through the investment in ESX aims to contribute to robust regulatory frameworks and foster best practices within the ESX ecosystem. The Group remains dedicated to providing ongoing technical assistance and capability enhancements to support the successful operations and growth of the ESX.

“We extend our congratulations to the ESX on its successful capital raise and commend the Government of Ethiopia and the private sector for their support in bringing this pioneering initiative in the country to fruition.

“Our partnership with ESX is a resounding affirmation of our unwavering dedication to promoting economic development, transparency, and exemplary corporate governance standards that foster an environment conducive to inclusive growth, even as we aim to maximize value for our esteemed shareholders,” Umaru Kwairanga, chairman, NGX Group said when the investment into ESX was announcement in 2024,

Ethiopia has registered some of the continent’s fastest economic growth rates for years. The Prime Minister’s moves to liberalise the economy since coming to power in 2018 have also attracted interest from foreign companies, including Kenya’s Safaricom.

Prime Minister Abiy Ahmed lauded the launch of ESX as a transformative milestone in the country’s journey toward economic modernization. “Today, we have officially rung the bell to launch the Ethiopian Securities Exchange, our nation’s first stock exchange,” the Prime Minister announced on X. “This is a call to global investors: Ethiopia offers immense potential, a fast-growing economy, and a clear trajectory toward shared prosperity.”

Ethiopia Investment Holdings (EIH), which controls 40 state-run companies, will play a crucial role in developing the market. The state-run company is already offering shares for the Ethio Telecom offer.

While charting the Pan-African market vision at Ethiopian Securities Exchange launch, Temi Popoola, Group CEO, Nigerian Exchange Group Plc reiterated the transformative potential of Africa’s capital markets.

Popoola emphasised the need for stronger regional collaboration, government-private sector synergy, and innovative market solutions to unlock the continent’s economic potential.

NGX Group’s strategic investment in ESX underscores its leadership in advancing Africa’s capital market infrastructure. “The launch of ESX represents a pivotal moment for Ethiopia and the broader African financial landscape,” Popoola stated. “ESX will serve as a crucial mechanism for capital formation and market liquidity, driving sustainable economic growth.”

Expounding on NGX Group’s investment rationale, Popoola highlighted Ethiopia’s immense market potential and the shared vision of fostering economic growth through innovation. “Our partnership transcends traditional investment parameters,” he explained. “It is about ensuring that ESX evolves into a key player in Africa’s financial ecosystem, enabling cross-border investments and setting benchmarks for market development.”

Popoola also drew parallels with global success stories like India, which has leveraged its capital markets to achieve significant economic transformation. He emphasized the importance of responsible market opening to attract local and continental capital. “By following this path, Ethiopia can become a financial hub in Africa,” he remarked.

Drawing from NGX Group’s six decades of experience, Popoola shared insights on diversifying financial instruments and expanding access to investment opportunities. “With the right mix of innovation, policy support, and regional collaboration, Ethiopia’s capital market can play a transformative role in driving economic development and establish itself as a leader in Africa’s financial ecosystem,” he noted.