For Ghana to successfully re-enter the bond market, its fixed-income sector must develop a yield curve that accurately reflects market conditions, according to Madeline Nettey, CEO of Republic Investments.
Speaking in an interview with the B&FT, Nettey emphasized that the pricing of medium- to long-term government bonds must align with their position on the yield curve and the associated risks to attract investors away from short-term instruments.
The government has signaled its intention to return to the bond market in 2025 following the completion of its Domestic Debt Exchange Programme (DDEP) in September 2023. However, Nettey noted that last year’s investment climate was marred by the fallout from the DDEP and election-related uncertainties. Although Ghana’s economy showed signs of stabilization—with GDP averaging 6.3% in the third quarter of 2024 and inflation trending downward for much of the year—price pressures resurged in the final quarter, eroding earlier gains.
“For most of the year, GDP remained steady, and inflation was on a downward trajectory. However, the inflation rate began rising again in the last quarter, reversing some of the progress made earlier,” Nettey explained. Inflation closed 2024 at 23.8%, exceeding the IMF program’s 22% target, driven largely by a drought-induced surge in food prices, which reached 27.8%. Non-food inflation, meanwhile, eased slightly to 20.3%. By January 2025, inflation remained stubbornly high at 23.5%, reflecting persistent economic pressures.
A central bank rate cut aimed at stimulating lending also failed to achieve its intended impact, as election-related uncertainties kept investors cautious. “The timing of the policy rate reduction coincided with the peak of the election period, which typically sees a wait-and-see approach from investors in the final quarters,” Nettey said.
Despite these challenges, investor confidence has shown signs of improvement, bolstered by the new government’s decision to honor a GH¢6.081 billion ($490 million) DDEP coupon payment on February 17, 2025. This payment, made in cash and kind, along with a GH¢9.7 billion buffer for mid-year obligations, has been widely viewed as a positive step toward rebuilding trust in the market. “The coupon payments and the publicity surrounding them have significantly boosted investor sentiment. They reinforced the continuity of governance and demonstrated the government’s commitment to meeting its obligations,” Nettey noted.
Recent bond auctions have further underscored this renewed confidence, with bids nearly doubling the target amounts. For instance, a February 28, 2025 auction saw GH¢56.45 billion in bids against a target of GH¢22.28 billion, driving Treasury yields downward. The 91-day bill rate dropped by 369 basis points to 20.79%, while the 182-day and 364-day bill rates fell by 240 and 460 basis points, respectively. “The oversubscription reflects excess liquidity and growing confidence in lending to the government. This trend could help lower financing costs for the government in the short term,” Nettey added.
However, the yield curve remains inverted, with long-term bonds offering coupons around 10% while short-term Treasury bills exceed 20%. “Ghana’s yield curve needs alignment to ensure that returns on long-term investments reflect the associated risks. Currently, long-dated instruments are trading at steep discounts to match the yields of short-term instruments. This imbalance needs to be addressed to create a more equitable investment climate,” Nettey explained.
She also highlighted the challenges of managing this situation under an IMF program, stressing the need for policies that improve economic performance, boost the real sector, and further reduce inflation to create room for additional policy rate cuts. “A quick fix is unlikely, given that DDEP bonds extend well into the 2030s. However, the downward trend in short-term rates is a step in the right direction and must be supported by strategic policies to spur economic growth,” she concluded.
In summary, while Ghana’s bond market re-entry faces hurdles, aligning the yield curve with market realities and maintaining fiscal discipline could pave the way for a successful comeback.
