The Nairobi Securities Exchange: A Dying Market Held Hostage By Poor Leadership And Outdated Policies

The Nairobi Securities Exchange (NSE), once a symbol of hope for Kenya’s economic growth, is now teetering on the brink of collapse. What was once a vibrant marketplace for investors has become an afterthought in Kenya’s broader financial landscape. Like a fading echo of its former self, the NSE has fallen victim to a lethal combination of poor leadership, antiquated policies, and an apparent unwillingness to embrace technological advancements.

The exchange, which should be the heartbeat of Kenya’s financial sector, now lies dormant, choked by the very people entrusted with its success.

It all began with a single stroke of regulatory overreach. During Uhuru Kenyatta’s government, a bizarre policy was introduced that barred industry players from chairing the NSE. Imagine barring a doctor from leading the Kenya Medical Association or a lawyer from heading the Law Society of Kenya. It is akin to asking a bird to soar while clipping its wings. This regulation singlehandedly stifled expertise, leaving the NSE at the mercy of outsiders who lacked an understanding of market dynamics. Leadership was handed to those who, like blind men leading the sighted, fumbled with decisions that devastated the market.

Read Also: The Bourse In A Snippet: CBK Injects Ksh 87.50 Billion Into The Market

The leadership vacuum that resulted from this regulation further compounded the NSE’s woes. The exchange became a playground for individuals who were more interested in holding ceremonial titles than understanding global financial trends. Incompetent leadership has transformed the NSE into a mockery of what it once was, bringing to mind Gollum clutching desperately at his “precious” in The Lord of the Rings. It’s not just the chairpersons—key decision-makers have failed to grasp the evolving needs of the market, instead overseeing its gradual decay. “A house without a foundation cannot stand,” and the NSE is that crumbling house, its foundation eroded by poor leadership choices.

Technology could have been the saving grace for the NSE, but here too, incompetence reigns supreme. In a country with one of the world’s most advanced mobile payment systems, it is laughable that the NSE hasn’t fully leveraged technology to make investing easier for the average Kenyan. Villagers can send money across continents in seconds via mobile phones, yet they can’t invest in their local stock market. This failure to integrate mobile technology into trading systems is an unforgivable oversight. As the proverb goes, “Do not hide your light under a bushel.” Kenya’s technological prowess should shine brightly through its financial systems, not remain hidden under outdated policies.

The unregulated investment options that are flourishing in Kenya are another byproduct of the NSE’s failure. Desperate for opportunities, Kenyans are turning to unregulated schemes, many of which are scams. They want to invest, but the NSE, with its bureaucratic hurdles and lack of appealing products, leaves them with little choice. Instead of attracting these investors, the NSE has pushed them away, leading to countless Kenyans being scammed. This could easily be solved by introducing new, simplified investment products tailored to the needs of ordinary Kenyans, yet the leadership seems content to let the market stagnate. “When the sheep have no shepherd, they are scattered and lost,” and the same applies here—without strong leadership, the NSE is driving potential investors into the arms of fraudsters.

Government policies have further hammered the final nails into the NSE’s coffin. The death of manufacturing, agro-processing, and production sectors has had a ripple effect on the stock market. When the backbone of the economy collapses, the stock market, which should reflect economic vibrancy, suffers. As Kenya’s industries crumble, so too does the flow of companies ready to list on the NSE. A dead industry equals a dead stock market. “A tree without roots will soon fall,” and the roots of Kenya’s industrial base have been rotting for years, with no intervention to save them.

Read Also: Bamburi Retreats 22.4% Following Its Special Dividend Book Closure

During its golden years, the NSE saw a flood of successful IPOs, most notably from the energy and telecommunications sectors, which brought a new class of investors to the bourse.

Companies like KenGen and Safaricom symbolized an era of hope, with oversubscriptions showcasing the potential of Kenya’s capital markets. But as manufacturing and agro-processing fell under government mismanagement, the number of new IPOs dried up, leaving the NSE a barren field where only a few large firms like Safaricom and banks still hold any real weight. A market without fresh crops soon withers, and this is precisely what happened to the NSE.

There is, of course, a glimmer of hope. The introduction of new products such as Real Estate Investment Trusts (REITs) and exchange-traded funds could have provided a lifeline, but these have been poorly marketed and even more poorly understood by the public​.

The failure to properly implement these innovations shows just how disconnected the NSE leadership is from its core market. Rather than embracing the winds of change, they seem content to let the market stagnate under the weight of their ignorance.

The NSE is also heavily skewed towards a handful of large companies, such as Safaricom, the major banks, and multinational firms like BAT Kenya. This over-reliance on a few big names makes the market incredibly fragile. “A stool cannot stand on one leg,” and the NSE has precariously balanced itself on the fortunes of these few firms. When they falter, the entire market shakes. The lack of diversity in listed companies is a direct result of the poor industrial policy and government inaction in fostering a conducive environment for local businesses to grow and list.

Foreign investors, once keen on Kenya’s potential, have also taken note of the stagnation. Many have pulled out, driven away by the lack of innovation, transparency, and viable investment options. Like migratory birds leaving a barren land, they have sought more fertile grounds in other markets. Kenya’s government, rather than addressing the underlying issues, has remained silent, as if hoping the problem will solve itself. “The hunter who waits for the prey to come to him will go hungry,” and the NSE has been starving for too long.

Read Also: The NSE: A Decade Of Missed Opportunities, Where Dreams Go To Die… And Stay Dead

The Capital Markets Authority (CMA), tasked with regulating the NSE, has also done little to address the growing concerns. While they have made moves towards introducing ESG (Environmental, Social, and Governance) reporting standards, this is merely window dressing for deeper structural issues that remain unresolved. Governance reforms are crucial, but they must be accompanied by practical, actionable steps to revive investor confidence and bring new life to the exchange.

What is needed now is bold action. The first step should be reversing the regulations that prohibit market players from taking leadership roles within the NSE. Experienced, knowledgeable insiders must be allowed to guide the market. Next, the government must enact policies that revive Kenya’s manufacturing and agro-processing sectors. Without a vibrant industrial base, the NSE will continue to limp along, supported only by a handful of large firms.

The NSE must also embrace technology wholeheartedly. A mobile-based trading platform should be introduced that allows even the most remote rural Kenyan to participate in the stock market. This will democratize investing and ensure that the exchange taps into the full potential of the country’s population. Additionally, the introduction of more tailored, accessible financial products can attract the middle class and bring them back into the fold.

Lastly, the NSE needs visionary leadership, individuals who understand the intricate dance of global markets and the needs of local investors. “A market without visionaries will perish,” and this rings true for the NSE. The market is not beyond saving, but without immediate intervention, it will soon be little more than a historical footnote.

The Nairobi Securities Exchange, once a beacon of Kenya’s economic promise, is now a symbol of squandered potential. It’s time to reverse course before the final curtain falls on what was once Kenya’s financial crown jewel.

Read Also: The Bull That Never Roared: How Kenya’s Leaders Have Tamed the Nairobi Securities Exchange Into Oblivion