The Nairobi Securities Exchange (NSE) has set an ambitious target of netting an additional nine million local retail customers and list 40 new companies over the next five years as part of a strategy to rejuvenate activity on the bourse.
In its 2025-2029 strategy, the NSE says it wants to shore up local investor participation, which has dwindled over the past decade, leaving the market vulnerable to foreign investors who are quicker to react to political uncertainty, and end the long listing drought.
However, the NSE’s ambitious plan has been met with pessimism given the long drought of IPOs on the bourse. Kenya's last IPO was in 2015, when property investment fund ILAM Fahari I-Reit listed on the NSE after raising Sh3.6 billion.
Besides the lack of fresh listings, the NSE has witnessed delistings and suspensions of top firms, including Athi River Mining Cement, Mumias Sugar and Kenolkobil.
Moreover, most of the retail investors who experienced the stock market boom of the 2000s, when Kenya witnessed a flurry of IPOs, including Safaricom, Equity Bank and Co-operative Bank, have gone dormant, leaving the market to be dominated by foreign investors.
However, the NSE is bullish that a turnaround will take place in the next five years, with an average of eight new company listings per year and 1.8 million new active customers.
“With a target to list 40 new companies, the NSE is committed to attracting both large and small enterprises, including SMEs, to the exchange,” the new strategy states.
“By listing these companies, we will deepen market liquidity, provide a wider array of investment opportunities, and support the growth of local businesses. This will be achieved through campaigns that highlight the benefits of listing and through regulatory innovations that reduce barriers to entry for smaller firms,” added the NSE.
Bear run
To onboard nine million wananchi traders, the NSE intends to undertake extensive investor education, simplify onboarding processes and create accessible trading platforms.
“Over the last decade, foreign investors have dominated the trading activity on the NSE, particularly in high-cap stocks such as Safaricom, Equity Bank, and East African Breweries Ltd (EABL),” says the NSE.
“However, foreign investment has been highly volatile. For example, in 2023, the NSE saw significant foreign outflows, particularly due to a weakened shilling and a flight to safety by global investors, resulting in a net foreign outflow of Sh18.6 billion.”
The NSE notes this trend was exacerbated by global economic uncertainties and rising yields in safer markets, like the US.
“In contrast, local retail investor participation has been minimal, which has left the market vulnerable to foreign capital flight during periods of volatility.”
The flight of local investors since 2014 has seen the NSE 20 share index, the benchmark index, drop steadily towards a low of 1,416 points in the last ten years.
But with the first quarter of 2025 already over, the target is proving to be over-ambitious, with the NSE yet to list at least two firms and net 450,000 retail investors in the first three months.
According to data from the Central Depository and Settlement Corporation (CDSC), about 97.5 percent or 1.5 million accounts used to trade securities, including shares on the NSE, are inactive.
Only 38,594 out of the 1,555,073 share accounts participated in trading in 2023, representing 2.48 percent, CDSC data shows.
The lower participation of retail investors is the product of the high level of speculation that dominates their investment decisions.
This has kept investors stay away from trading in a market that has failed to attract fresh listings and has been plagued by a prolonged bear run, with falling prices discouraging speculators.
The National Treasury made changes last year to woo more firms to list on the NSE by changing the requirement that companies wishing to issue shares show proof of having made a profit in three of the previous five years to just one year.
Treasury reckoned that the condition had restricted many unprofitable businesses from raising capital through IPOs.
A prolonged tough operating environment—which started at the peak of the Covid-19 pandemic in 2020 and aggravated by the Russia-Ukraine war and the rise in interest rates by the central banks in rich countries—has left many businesses struggling to grow their bottom lines.
Under the new regulations on public offers, listings and disclosures, companies that want to be in the SME market segment do not have to be profitable. However, they must have a business plan that demonstrates the potential to grow to profitability.
The Kenya Kwanza government has lined up 11 State-owned entities with an asset value of over Sh200 billion for privatisation.
Stable government-owned firms that the William Ruto-led administration plans to offload include the Kenya Pipeline Company, Kenyatta International Convention Centre, Kenya Literature Bureau, New Kenya Co-operative Creameries and the Kenya Seed Company.
