African markets

The case of Ghana Eurobonds

Eurobonds denominated in USD have become the darlings of the African investor. Nigeria and Ghana are among the most requested Eurobonds. Nigeria, with a low debt-to-GDP ratio of 34.98%, offers strong returns with relatively low risk to capital.

Ghana offers extremely high yields alongside a scorching debt-to-GDP ratio of 78% (March 2022) from 80.1% in December 2021. There are genuine indicators that the economy is rebounding, but the sovereign is n has yet to convince international markets that the hard sell within the Ghana Eurobond persists.

Eurobonds have become the safe-haven asset class for the local investor as soaring global inflation seeks to eradicate any real return on local currency assets. Current yields above 20% on 4-5 year Ghanaian risk are attractive in the face of fairly serious headwinds.


The Ghanaian economy had already faced fiscal debt issues since 2014, to which the global pandemic provided an unwanted catalyst as capital spending surged.

The government set a budget deficit target of 7.4% in September 2021 that international markets deemed too ambitious and unlikely to be met. The sale made the opinion of international investors very clear. Markets were looking for a solid fiscal plan to determine whether the sovereign was indeed back on track.


Moody’s Ratings on February 4, 2022 downgraded the ratings of Ghana’s long-term issuers and senior unsecured bonds from B3 to Caa1, adding more fuel to an increasingly volatile situation.

Electronic direct debit and budget cuts

After months of uncertainty, the Minister of Finance had good news for the investor, the direct debit. The levy is expected to bring in about $1 billion in revenue to support the country’s fiscal situation. Additionally, 30% spending cuts were also announced in the budget for 2022. The levy was the “silver bullet” and upon passage of the legislation, a welcome rebound in Ghana Eurobond prices. The international market awaits news of the implementation and actual revenue figures.


The surge in global inflation was another blow to which the sovereign had to react. The Russian invasion of Ukraine has driven up commodity prices and, more recently, China’s zero Covid policy locking down Shanghai has compounded supply chain problems. The inflation figure of 23.6% came to double the Bank of Ghana’s target. The Ghanaian cedi in its free fall, depreciated by 18.5% over the past four months. A 250 basis point hike in the policy rate by the Bank of Ghana in March kept the exchange rate at a resistance level of 8 GHS against the US dollar, slowing the rate of depreciation. We expect the further 200 basis point rise to further stabilize the cedi against the dollar.

Positive indicators

The situation is certainly not so serious. Ghana recorded an annual growth rate of 5.4% and 7% in the fourth quarter of 2021 beating the forecasts of the central bank and the international monetary fund.


The Bank of Ghana’s net reserves currently stand at $4.6 billion, giving Ghana breathing space to get the “tax house” in order, bringing debt down to a sustainable level.

Our opinion

The local investor must now see in the current setbacks of the sovereign an opportunity. A little too volatile for daily trading, but a good time to take some risk on the Ghana Eurobond curve if you’re determined to hold out to maturity.

In our view, the sovereign can continue to service international debt until 2024. If access continues to be blocked in international markets, then perhaps the international investor is eagerly hoping for news of IMF intervention.