Introduction Samira Mensah

Building Africa’s capital markets from within

Africa’s economic development over the coming decades will depend on building the domestic institutions, instruments and market infrastructure needed to mobilize and allocate capital at scale. 

Structural constraints — shallow capital markets, limited fiscal flexibility, dependence on imported energy and insufficient infrastructure investment — continue to weigh on the pace of development. While financial systems have strengthened, capital markets remain underdeveloped and fragmented across regions, limiting the long-term and scalable financing needed for infrastructure, industry, climate adaptation, the energy transition and sustainable economic growth. Despite rising government spending, Africa’s infrastructure financing needs are estimated at $155 billion annually through 2040, or about 5.6% of Africa’s 2024 GDP, according to a study from the African Union and the Organisation for Economic Co-operation and Development. This illustrates the scale of the challenge. 

Uneven market depth 

Financial intermediation remains uneven across African economies. Credit to the private sector averages less than 20% of GDP, compared with levels closer to or above GDP in developed financial systems. The limited scale of pension funds and private savings narrows the pool of domestic capital that can be channeled into long-term productive investment. Lower insurance penetration in many African markets undermines contractual savings pools and further limits the availability of long-term institutional capital.  

Uneven financial system depth across the continent risks reinforcing disparities in investment and development while constraining regional economic integration. Deeper local-currency markets can broaden financing options for governments and companies, build resilience to external shocks, and help create benchmark yield curves that support private-sector issuance. 

In West Africa, Nigeria demonstrates how domestic financial depth can coexist with macroeconomic volatility. Its dynamic banking system, with regionally active institutions across Africa, alongside its pension assets, sovereign debt market and role in West African financial flows, makes it an anchor for regional market deepening. Yet market volatility can be amplified when institutional strength, policy predictability and economic outcomes are perceived as less certain.

Trust and transparency 

At the heart of this challenge is trust and transparency. Investors allocate capital where they have confidence in the quality of information, the strength of institutions and the predictability of economic outcomes. When trust improves, capital can be mobilized at greater scale and at a more sustainable cost. When it weakens, funding costs rise and long-term investment is postponed. 

For Africa’s domestic capital markets to play a larger role, the focus needs to move beyond the availability of capital toward the mechanisms that connect savings with long-term investment. This includes deeper local-currency bond markets, more predictable sovereign yield curves, reduced reliance on foreign-currency financing and lower exposure to external shocks, broader corporate issuance, less reliance on bank funding, stronger financial disclosure standards, and a larger base of long-term domestic investors. Together, these elements can strengthen price discovery and support secondary-market liquidity over time. 

Transparent national credit assessments are another part of this ecosystem. Ratings provide standardized, granular and comparable views of credit risk and can help investors, issuers and policymakers differentiate risk more consistently, including in markets where pricing benchmarks are less developed and credit histories are limited. Ratings do not replace stronger institutions, deeper pools of capital or sound policy frameworks, but they can contribute to the information architecture needed for domestic markets to develop. 

Strengthening financial ecosystems 

Broader institutional coordination is also essential. Development banks often act as financiers, market builders, risk mitigants, standard setters and convenors. In partnership with public authorities, regulators, issuers, investors and market infrastructure providers, they can help strengthen financial flows, expand local-currency financing, improve risk-sharing mechanisms and support more integrated regional markets. 

Looking forward  

Africa’s economic future will be shaped by the integration of the real economy with domestic financial markets and investor confidence underpinned by greater transparency. Domestic capital markets will only deepen through a sustained effort to connect savings, issuers, long-term investors and credible risk information more effectively. Dedicated instruments linked to infrastructure, the climate transition and sustainable development may also help broaden the investor base, where supported by stronger local-currency markets and robust risk assessment frameworks. Ultimately, building Africa’s capital markets from within will require practical dialogue and institutional coordination to turn local pools of capital into long-term investment. 

S&P Global Ratings

Samira Mensah

Managing Director, Africa Research & Analytics, and Country Head, South Africa

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