Case for a stock exchange market for The Gambia


Stock exchanges basically serve as (1) primary markets where corporations, governments, municipalities, and other incorporated bodies can raise capital by channeling savings of the investors into productive ventures; and (2) secondary markets where investors can sell their securities to other investors for cash, thus reducing the risk of investment and maintaining liquidity in the system. 

Trades in the exchanges are conducted on the floor (called the ‘trading floor’) of the exchange itself, by shouting orders and instructions (called open outcry system). On modern exchanges, trades are conducted over telephone or online. Almost all exchanges are ‘auction exchanges’ where buyers enter competitive bids and sellers enter competitive orders through a trading day. Stock exchanges impose stringent rules, listing requirements, and statutory requirements that are binding on all listed and trading parties. Most exchanges also trade in commodities.

The Gambian economy has suffered some injuries recently as the wheels of economic activities have been slowing down due to the widening deficit gap and the reduction of both domestic and foreign investments. This problem is further compounded by the absence of an organised market to mobilise savings for investments in the critical sectors such as agriculture, tourism, infrastructure and commerce. The financing of the fiscal gap from domestic sources has created pressures on the interest rates that borrowers are finding it increasingly difficult to sustain.


If the government decides to borrow money to finance infrastructure projects they can sell bonds in the stock markets whereby members of the public buy these bonds thus loaning money to the government. When government start to compete for funds with borrowers in the private sector, this will bring down the cost of borrowing and there would be other funding options available that could provide investors to borrow at affordable rates.

 A huge debt poses a greater risk of precipitating a fiscal crisis, squeezes out funding for other functions of government and, unless some quick remedial measures are not taken, it can create pressures for higher taxes and reduced domestic savings leaving policy makers less able to address future risks that require significant short-term deficit spending.

One of the problems facing borrowers in our country is the lack of alternative sources of capital thus restricting access to credit as well as limiting the useful role the private sector can play as an engine of growth. Despite the increase in commercial banks operating today in the country, evidence still suggest that banks’ prime lending rates in the Gambia (approximately 23%) is relatively higher than those charged by other banks (7%) in the West Africa region. 

The creation of a stock exchange will provide alternative sources of capital and through competition, banks could be forced to cut down the interest charged on loans or risk losing out on valued customers to the markets. Having a free and open stock market will open up opportunities for businesses to access capital for growth and expansion.

When people withdraw their savings from the banks and invest in shares it usually leads to rational allocation of resources because funds, which could have been consumed, or kept idle deposits with banks, are mobilised and redirected to help companies finance their organisation’s activities. 

This may promote business activity benefiting several economic sectors. It can also provide the necessary impetus for growth and expansion in our economy, produces information on possible investments so that resources can be channeled to their most productive use whilst at the same time facilitate trading and ease the exchange of goods and services.

There are currently 29 stock exchanges in Africa located in 38 capitals at different regions in Africa. The first Exchange in Africa was founded in 1882 in Egypt. This was followed by the Johannesburg Stock Exchange (1887), Casablanca Stock Exchange (1929), Zimbabwe Exchange (1948), Nairobi Stock Exchange (1954), Nigerian Stock Exchange (1960), Tunis Stock Exchange (1969), Stock Exchange of Mauritius (1988), Botswana Stock Exchange (1989) and from 1990 to date the following were established: Ghana (1990), Swaziland (1990), Namibia (1992 Stock Exchange), Lusaka Stock Exchange (1994), Khartoum Stock Exchange (1994). 

Public companies (those traded on public exchanges) tend to have better management records than those companies where shares are not publicly traded (private companies). By having a wide and varied scope of owners, companies generally tend to improve corporate practices and efficiency to satisfy the demands of their shareholders as well as complying with stringent rules imposed by national stock exchanges. Shareholders of under-performing firms with poor financial, ethical or managerial records; are often penalized by significant share price decline, and they can dismiss any incompetent management team. Also, Media scrutiny and accurate financial reporting are essential ingredients of maintaining share prices. 

While steps have been taken to tighten macroeconomic policies and rebuild confidence in the economy, there is still the need to not only shift the financing of government deficit by the central bank through weekly T-bills auctions to the markets, but also to continue the unending process of bridging the deficit gap. To achieve that, government should have to save more (or even, perish the thought, balance the budget), leading to higher domestic saving which should lead to higher productivity.

 There are some who still think that Gambia is not yet ready to have a stock exchange giving the size of our economy and the lack of all the necessary legal and regulatory environment required for an effective public stock exchange. If we want to have small investors in the country to own shares as large investors in big companies like Africel, Gamcel or even some of the private banks such as GT Bank or Trust Bank including parastatals and some Insurance companies (potential candidates to be listed in the stock exchange); the best way to accomplish that will be through the exchange market.   

As we continue our journey towards becoming a middle-income country, we should seriously provide all the means necessary to spur economic activity through the private sector. A stock exchange can provide the fiscal discipline necessary to restore confidence in the government’s ability to manage the huge debt as well as give the public the opportunity to diversify their investment portfolio in order to maximise the return on investments. The movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy.

If we want to attract foreign investment and become one of the most economically progressive country in West Africa, we should create the environment necessary to spur economic activity and facilitate the exchange of goods and services. The best way to achieve these objectives is through the establishment of a national stock exchange. 

A stock exchange can play significant role to help heal the wound through the creation of investment opportunities for both government and public companies (those traded on public exchanges) and by mobilising savings for investments. It is people and businesses that are the source of a nation’s prosperity and Gambia possessed the panoply of means and resources to create a stock exchange market.


Dr Faal provides financial services for companies/ businesses in Senegal, Mali and the Gambia. He obtained his PhD in Finance (UK) and he is a certified Project Management Professional (PMP) and member of the Project Management Institute in Pennsylvania, USA. He has written many articles in the field of finance and business management.