Ghana’s planned four-year cedi-denominated sovereign bond could offer one of the more attractive fixed-income investment opportunities currently available to domestic investors, but inflation, interest-rate and currency risks will remain central to investment decisions.
The government is scheduled to open the book-build for the new bond on September 1, with final pricing expected after the order book closes on September 3 and settlement set for September 7.
The bond will mature in 2030 and repay its principal in full at maturity.
Market analysts expect the security to offer a yield of between 12.5 per cent and 13.5 per cent, with around 13 per cent considered a particularly attractive level for investors willing to hold the instrument for four years.
The investment case rests partly on the difference between the expected bond yields and returns currently available on shorter-term government securities.
At the August 31 auction, the 364-day Treasury bill was yielding about 10.78 per cent.
A four-year bond yielding around 13 percent would therefore offer a substantial premium over one-year government paper.
For investors who expect Ghana’s interest rates to decline further, the opportunity to lock in a 13 percent yield for four years could prove valuable.
Should Treasury-bill and bond yields decline in the coming years, investors holding the new security could also benefit from capital appreciation if they sell before maturity.
The potential real return is another attraction.
Ghana’s inflation rate declined to 4.6 percent in July after reaching 5.3 percent in June. The International Monetary Fund projects inflation of about 5.8 percent for 2026.
If inflation remains around current levels, a 13 percent nominal bond yield could generate a real return of approximately seven to eight per cent before tax.
The proposed bond also compares favourably with conventional bank deposits, where interest rates have generally declined in line with the broader easing in the interest-rate environment.
Equities, by contrast, have offered significantly higher returns but carry considerably greater risks.
The Ghana Stock Exchange Composite Index had gained 71.27 percent year-to-date as of August 28, but market analysts caution that such gains should not be projected automatically over the next four years.
For investors seeking predictable income and the return of capital at maturity, a government bond offers a more conservative alternative to equities.
However, the bond is not without risks.
Inflation remains a major concern. A return of double-digit inflation would reduce the bond’s real value and could push market interest rates higher.
Higher yields in the secondary market would, in turn, reduce the market value of existing bonds.
Investors who intend to hold the security until its 2030 maturity would be less affected by interim price movements, provided the government meets its contractual payment obligations. Those who may need to sell before maturity, however, would be exposed to mark-to-market losses.
For foreign investors and Ghanaian investors measuring their wealth in US dollars, currency risk presents an even greater challenge.
A significant depreciation of the cedi could eliminate the gains earned from the bond’s high nominal yield.
For example, a 15 percent depreciation against the dollar over a year could more than offset a 13 percent return on the bond when measured in dollar terms.
The cedi has remained relatively stable in recent months, with the dollar trading at around GH¢11.20 in late August, strengthening the short-term investment case.
Nevertheless, currency performance over a four-year investment horizon remains difficult to predict.
For investors with cedi-denominated liabilities, analysts say a clearing yield of around 13 per cent could offer an attractive combination of income, inflation protection and potential capital gains.
For dollar-based investors, however, the decision will depend less on the headline coupon and more on the expected performance of the cedi.
The final pricing of the bond will therefore determine whether the issue becomes a strong fixed-income opportunity or whether investors demand a higher premium for the inflation, duration and currency risks they are being asked to assume.
By: Toma Imirhe / businesspostonline
