African financial markets are becoming more sophisticated, but a new index shows trading is still too thin to make raising long-term money easy. The 2026 Africa Financial Markets Index, released by Absa, one of Africa's biggest banks, and OMFIF, a financial think tank, gives the continent its highest average score in a decade—56 out of 100—yet liquidity remains a stubborn hurdle for companies and governments seeking to raise long-term capital.
What the index measures
The index, now in its 10th year, scores 29 countries on how easily money can be raised and moved. It looks at a range of factors: the depth and efficiency of stock and bond markets, access to foreign currency, the size of pension savings, overall economic conditions, and the quality of regulation. A higher score means a country's financial system is better equipped to channel savings into productive investments, such as infrastructure, business expansion, or government projects.
This year, the average score rose to 56, a decade-high, with 21 of the 29 countries improving their scores. The improvement comes as inflation across the continent has eased, which typically makes it cheaper and more predictable for businesses and governments to borrow. Lower inflation also helps stabilize currencies and boosts investor confidence.
But the headline improvement masks a persistent weakness: trading volumes in many African markets remain thin. That means even when a stock or bond is listed, there may not be enough buyers and sellers to execute large trades without moving the price significantly. For investors, this makes it harder to enter or exit positions, and for issuers, it raises the cost of raising capital.
Why liquidity matters
Liquidity is the lifeblood of any financial market. When a market is liquid, investors can buy and sell assets quickly and at prices close to their true value. When it's not, even a well-run company can struggle to raise money through a public offering, and investors may demand a higher return to compensate for the risk of being stuck with an illiquid asset.
For African economies, the lack of liquidity is a particular problem for long-term capital—money that is locked up for years, such as pension funds or infrastructure bonds. These investments require patient investors, but thin trading makes it harder to attract them. As a result, many African companies and governments still rely on foreign borrowing or short-term financing, which can be more expensive and volatile.
The index's findings echo a broader trend across emerging markets, where shipping rates and other economic indicators often reflect the ebb and flow of global demand. But Africa's challenge is more structural: many of its stock exchanges are small, with few listed companies and limited retail participation.
What it means for investors
For everyday investors, the index is a reminder that Africa's financial markets are improving, but they still carry unique risks. The decade-high score suggests that reforms—such as better regulation, more transparent reporting, and deeper pension systems—are starting to pay off. Countries that score well are generally safer places to invest, with more predictable rules and better access to foreign currency.
However, the liquidity problem means that investors should be cautious about expecting quick exits. If you buy a stock or bond in a market with thin trading, you may not be able to sell it when you want, or you may have to accept a lower price. This is especially true for smaller markets, where a single large trade can move the market.
The index also highlights the importance of diversification. While some countries are improving rapidly, others lag behind. Investors who spread their money across several African markets—or across asset classes like equities, bonds, and private equity—can reduce the risk of being exposed to a single illiquid market.
Looking ahead
The easing of inflation is a positive sign, but it's not enough on its own. To truly deepen their markets, African countries will need to boost trading volumes, attract more institutional investors, and develop new financial instruments, such as longer-dated bonds and derivatives. Some countries are already making progress: Nigeria's Dangote Refinery has been pushing for a major IPO, which could bring new liquidity to the continent's largest stock exchange.
For now, the index serves as a useful barometer for anyone considering African investments. It shows that the continent is moving in the right direction, but that the road to deep, liquid markets is still long. As always, investors should do their own research and consider their own risk tolerance before putting money into any market, especially one where trading can be thin.
The full index report, which includes country-by-country rankings, is available from Absa and OMFIF. It's a valuable resource for understanding where Africa's financial systems stand—and where they need to go.
