Why Is The NSE Dead When We Have So Much Opportunity For IPOs And a Sustainable Ecosystem Of Investments?
KEY POINTS
The NSE has long been lauded as one of the best ways to hedge against inflation through investments, but it's barely marketed as such. Effective marketing is key to public engagement, yet the NSE fails to communicate its value, leaving Kenyans in the dark about its benefits.
KEY TAKEAWAYS
Equally disturbing is the government’s refusal to list critical parastatals on the NSE. By keeping such entities within the opaque confines of state ownership, the government prevents citizens from partaking in the financial benefits of national assets.
The Nairobi Securities Exchange (NSE) was once a beacon of growth and a destination for investors eager to tap into Kenya’s economic promise. Today, it lies in a paradoxical state of dormancy amidst plenty. Kenya boasts a vast number of family-owned businesses, yet very few consider listing on the exchange to fund their expansion. This reluctance to tap into public investment through the NSE reveals a deeper, systemic issue at the heart of Kenya’s capital markets. Listing on the NSE should offer an efficient way to access capital, enabling growth that benefits the economy. Instead, business owners perceive the NSE as burdensome and opaque, a reflection of outdated regulations and lackluster leadership failing to provide any incentive to list.
Read Also: The Significance of Stock Market Education And the Impact Of Foreign Investors On The NSE
The government’s reluctance to leverage the NSE for capital raises fundamental questions about its priorities. Trillions in untapped capital sit idle, while Kenyans clamor for opportunities to invest. It seems the government would rather turn to foreign debt than stimulate local capital investment. Had the primary market been fully utilized, citizens could invest in critical infrastructure projects, achieving a double benefit of raising funds domestically while reducing debt dependence. Yet, this avenue remains closed, leaving Kenyans to wonder why the government bypasses a reliable, local capital market in favor of potentially volatile international borrowing.
Adding to this frustration is the baffling reality that companies which no longer conduct business still trade on the NSE. This is both a sign of regulatory negligence and a grave distortion of the exchange’s purpose. Such entities siphon credibility from the NSE, deterring potential investors who might otherwise see it as a legitimate arena for profitable investment. Instead, they view it as a market riddled with “zombie companies” that contribute nothing to the economy, effectively weakening the trust required for vibrant market participation.
The NSE’s leadership structure has exacerbated these issues, where laws prevent individuals with “skin in the game” from holding key leadership positions like CEO or chairman. While intended to prevent conflicts of interest, this prohibition has created a leadership vacuum of individuals unconnected to the market’s fate, a cadre of professionals who do not stand to lose should the exchange flounder. They lack the incentive to innovate, reform, or promote growth, leading the NSE further down the path of irrelevance. This law must be revised; the NSE needs leaders who have as much to gain or lose as the investors they serve, ensuring decisions are made with urgency and care.
The NSE has long been lauded as one of the best ways to hedge against inflation through investments, but it’s barely marketed as such. Effective marketing is key to public engagement, yet the NSE fails to communicate its value, leaving Kenyans in the dark about its benefits. Instead of positioning the market as a powerful wealth-generation tool, the NSE’s leadership appears content with inertia, assuming that sophisticated investors will find their way while sidelining the potential contributions of retail investors.
Government policy, too, plays a key role in the stunted growth of the NSE. By crowding out the private sector in the credit market, it’s left businesses with little incentive to seek out alternative financing options, including capital markets. When the government itself provides loans at favorable rates, the private sector’s interest in the stock market diminishes. This interference stifles innovation in financial products that could breathe life into the NSE and open new avenues for raising capital.
Read Also: Safaricom Tops The NSE As NCBA Moves The Tables
Take, for example, the saga around Jomo Kenyatta International Airport (JKIA). Rather than involving strategic partners with questionable track records and incurring new debt, the government could have issued infrastructure bonds on the NSE, raising funds locally while giving Kenyans a stake in a critical national asset. Such an approach would have not only provided much-needed capital but also offered citizens a tangible role in nation-building. By failing to do this, the government sends a clear message: it is more willing to pursue politically expedient deals than create lasting wealth for its people.
The neglect of pension funds in the primary segment of the NSE also highlights missed opportunities for growth. Pension funds globally use stock markets to generate robust returns for their members. Yet, in Kenya, regulatory barriers and the lack of a thriving primary market stymie this approach. Leaders have seemingly ignored the potential for a pension-led revitalization of the NSE, robbing retirees of better returns and the economy of valuable liquidity.
Equally disturbing is the government’s refusal to list critical parastatals on the NSE. By keeping such entities within the opaque confines of state ownership, the government prevents citizens from partaking in the financial benefits of national assets. Public listings would provide these companies with capital for growth, while also enhancing transparency and accountability. This reluctance to open parastatals to public investment suggests either a profound mistrust of the market or a desire to maintain control over these resources, neither of which serves the Kenyan people.
The scarcity of regulated investment options has, predictably, led to an explosion of scams and Ponzi schemes preying on uninformed Kenyans. Had the NSE developed a diverse range of regulated investment products, such schemes would have faced stiff competition from legitimate options, reducing the public’s vulnerability to fraud. By failing to diversify its offerings, the NSE has indirectly fostered a climate of financial insecurity, with its lack of innovation proving costly for ordinary Kenyans.
Is the NSE simply an elite playground? The evidence suggests it might be. The board’s decisions, or lack thereof, favor those with the means and knowledge to navigate a dysfunctional system, leaving the average Kenyan excluded. The same policies that could democratize wealth are ignored, effectively consolidating wealth within a narrow segment of the population. To the average Kenyan, the NSE appears to exist solely to serve the interests of the privileged few, while the rest face a market structure that shuts them out.
Kenya’s economy would benefit significantly from an active, well-managed NSE, yet the exchange remains crippled by outdated regulations, disconnected leadership, and government indifference. Only radical reforms can pull the NSE from the brink of irrelevance, and these reforms must start at the top. Leaders with skin in the game must helm the NSE—those who understand the stakes and can create the momentum needed to foster growth and credibility. When leaders have a vested interest in the market’s success, they are more likely to enact necessary reforms and take strategic risks that could position the NSE as a leading hub in Africa.
Kenya’s potential for IPOs is undeniable. Across the continent, African exchanges have seen growth due to tech and energy IPOs, yet Kenya lags. Family-owned businesses, many of which are ripe for listing, are deterred by the NSE’s bureaucratic complexities and the lack of incentives. If the NSE truly intends to be a driver of growth, these impediments must be addressed, inviting companies to leverage the market for capital and catalyzing Kenya’s economic prospects.
It’s time the NSE promoted a sustainable ecosystem for both local and foreign investments. Kenya’s immense untapped potential in green energy, technology, and agriculture could attract significant capital if properly structured investment products were introduced. This ecosystem would diversify the market and encourage participation from a wider demographic, making it not just a place for elite speculation but a genuine platform for national growth.
Ultimately, the NSE’s path to revival lies in accountability, transparency, and leadership committed to inclusivity. Leaders without personal stakes are content to let the NSE stagnate, but those invested in its success will strive to improve it. Without reforms, Kenya will continue to watch potential investors turn to foreign markets, leaving the NSE as a mere shadow of what it could be. The time for action is now—if Kenya’s leaders genuinely wish to see a prosperous, sustainable economy, they must prioritize transforming the NSE into a vibrant, accessible, and profitable exchange that serves all.
Read Also: The NSE: A Decade Of Missed Opportunities, Where Dreams Go To Die… And Stay Dead
About Steve Biko Wafula
Steve Biko is the CEO OF Soko Directory and the founder of Hidalgo Group of Companies. Steve is currently developing his career in law, finance, entrepreneurship and digital consultancy; and has been implementing consultancy assignments for client organizations comprising of trainings besides capacity building in entrepreneurial matters. He can be reached on: +254 20 510 1124 or Email: info@sokodirectory.com
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