Will Ghana sustain investors’ buy-in?

Ghana's latest T-bills auction has garnered significant attention with bids hitting an all-time high. The auction saw investors submit bids totaling 20.49 billion cedis, marking a 140.5% oversubscription rate. However, the government only accepted 9.634 billion cedis despite the strong demand. Oforiwaa Attipoe, the Manager of Global Market Sales for Ghana at Standard Bank, shed light on the fixed income and FX market movements in a recent interview with CNBC Africa. Oforiwaa pointed out that since the beginning of the year, Ghana's treasury market has experienced a noticeable downward trend in interest rates. This trend has continued under the new administration in office since January 7th. Despite concerns regarding the rate of drop, the government's borrowing appetite, investor confidence, and overall economic strategy have remained steadfast. Year-to-date, the government has been able to borrow approximately 65 million cedis through weekly auctions. The interest rates for various tenors have also witnessed a decline, with rates dropping by about 4% across the board. Currently, the 91-day T-bill is printing at around 24.4%, the 182-day at 25.9%, and the 365-day at 27.3%. The decline in rates has been attributed to the government's deliberate debt management strategy aimed at lowering interest rates to reduce borrowing costs. Additionally, investor preference for the short end of the curve has increased due to the lack of alternative attractive investment instruments in the financial markets. Despite the drop in rates, the 365-day T-bill remains attractive to investors, trading at around 27.9%. When questioned about the potential resistance from investors if the government continues to lower rates, Oforiwaa noted that there is still significant interest in the 91 to 364-day bucket due to the attractive yields. Transitioning to the FX market performance, Oforiwaa highlighted that the CD's performance has been influenced by various domestic and external factors, including inflation, interest rates, global commodity prices, and monetary policies. Despite minimal volatility, the CD has remained strong against the dollar and other major trading currencies. The year-to-date depreciation stands at approximately 3.98%, with the CD trading at 15.58 compared to the initial 14.85%. The central bank's interventions, amounting to $994 million, have contributed to the relative stability of the local currency. Looking ahead to the 2025 budget, monetary and fiscal authorities are eyeing a strict budget aimed at cost reduction and revenue enhancement. Collaboration with the central bank is expected to address currency stability, with inflation projected to continue its downward trajectory. Inflation targets for this year aim for single-digit figures, around 8% plus or minus, following last year's miss on the 15% target. The government is optimistic about driving inflation down despite challenges and anticipates between 50 to 100 basis point cuts in the MPC around March. In conclusion, Ghana's T-bills auction and FX market movements reflect the ongoing economic strategy shift and investor sentiment in the region. With a focus on interest rate reductions, currency stability, and inflation control, the government and financial authorities are aligning efforts to bolster Ghana's economic outlook and attract more investment in the coming months.