Dangote's refinery IPO tests Africa's market muscle

JOHANNESBURG, Oct 14 (Reuters) - For Aliko Dangote, the test is happening now. The Nigerian billionaire’s ongoing refinery initial public offering is aiming to raise billions of dollars from retail and institutional investors, a measure of whether African markets can support fundraising on that scale. His effort lands in a year when most of the continent’s financial markets grew stronger, even as the people who depend on them, from entrepreneurs seeking capital to savers whose pensions feed long-term investment, still face a familiar obstacle: markets that remain too thin to trade easily.

The 2026 Africa Financial Markets Index, compiled by Absa bank and the think tank OMFIF, scored 29 countries and found 21 of them improving. Easing inflation, stronger foreign exchange reserves and regulatory reforms helped deepen markets, lifting the average score to 56, its highest level in a decade. Now in its 10th year, the index measures how easily countries can raise and move capital, looking at stock and bond markets, access to foreign currency, pension savings, economic conditions and regulation.

Behind the numbers are practical stakes. Well-functioning markets can help businesses access financing beyond traditional bank loans and channel household savings into infrastructure and other long-term investments. Yet the report found that expanding financial products and market infrastructure has not consistently translated into greater trading activity. Liquidity remains an ongoing challenge for anyone trying to buy, sell or raise money at scale.

South Africa retained the top spot in the rankings, followed by Mauritius and Namibia. Cape Verde was the biggest mover, climbing six places to 13th on the strength of improved foreign exchange reserves and new sustainable finance initiatives. Ghana rose four places to sixth, as falling inflation, stronger stock market activity and improving economic conditions aided its recovery from a debt crisis, a turnaround with direct consequences for a country that has lived through the strain of that crisis.

Not every country moved forward. Botswana and Nigeria each slipped two places, to seventh and eighth respectively. Nigeria was hurt by weaker foreign exchange access and transparency scores, while Botswana suffered from rising inflation. These pressures shape how easily businesses and investors in those countries can obtain and deploy capital.

Meanwhile, the gains come against a difficult global backdrop. The report warned that rising trade tensions, conflicts in Ukraine and the Middle East and elevated energy costs could undermine economic stability across the continent, risks that would ultimately be felt in the cost of borrowing and the availability of financing for ordinary firms and households.

“The global environment is far from straightforward,” Absa Group Chief Executive Kenny Fihla wrote in the report, pointing to risks including a super El Nino. “In these times, all countries must bolster their fundamentals to best weather the storm. Happily, many African countries are in that very position,” he said.

This year’s index also changed how it judges performance. A revised methodology measures countries against fixed benchmarks of good practice rather than against one another, and historical scores were recalculated to allow comparisons, a shift intended to give a clearer picture of where markets genuinely stand.

For the people who rely on these markets, the message of the survey is one of steady, incomplete progress. The foundations for raising capital are strengthening across much of the continent, but until trading deepens, the promise of easier financing for businesses and better returns for savers remains only partly fulfilled. Whether Dangote’s refinery share sale can draw billions from local and international investors may offer an early answer.