Editorial: Ghana to raise $750m ....

... on International market this week

If you had any doubts about the strength of Ghana's economic recovery trend under President John Agyekum Kufuor, then look no further than the London Stock Exchange this Thursday where the first ever listing of Ghana's sovereign bonds on the international capital market will be set. Trading is expected to last one week.

The Ghanaian Parliament has already approved a ceiling of $750 million. Trade insiders believe Thursday’s figure will be set at a minimum of $500 million. The tenure or maturity of the listed bond will also be determined Thursday, but it is expected to be between 5-10 years.

This will make Ghana the second sub-Saharan African nation, after South Africa, to be allowed to issue bonds on the international market as a means of raising funds to finance national projects.

This would be a radical departure from Ghana’s traditional sources of international funding, usually bilateral, multilateral loans and grants, which often come with controversial conditionalities. The only conditionality to this, Kwadwo Baah-Wiredu told The Statesman at the weekend, is that you need to be ready to use the money as soon as you access it because interest will immediately start accruing.The funds being raised are for building energy and transport infrastructure.

"We must be able to utilise the funds as quickly as possible,” warns the Finance Minister. “The onus is on our engineers and quantity surveyors to be up and doing. This is not money coming from the AfDB or World Bank, which sometimes attracts delays of more than six months in spending. The environment has changed entirely and we need to be up to it.”

Last week, Minister of State at the Finance Ministry, Anthony Akoto Osei led a team of experts, including Ken Ofori-Atta of Databank Financial Services, on an international road show to galvanise investor interest for the pending bond issue. The North American road show took them to Los Angeles, New York and Boston.

Today, the team are expected to be joined by Finance Minister Kwadwo Baah-Wiredu, Kwame Pianim of New World Investment and Michael Kobina of Ecobank for the European leg of the road show, which will take them to London, Frankfurt and Geneva.

Also in the team is Bank of Ghana Governor and his Deputy, Messrs Acquah and Bawumia.

The leading managers for this maiden sovereign bond issue are the UBS and Citigroup, with local co-managers Databank, Ecobank and New World International.

They are using Ghana’s record B+ credit ratings from Standard & Poors and Fitch Ratings to venture into an area that has been virtually closed to African economies.

Although improvements in creditworthiness and favourable financing conditions have been noticed in Africa, only a few countries on the continent have been able to access the international bond market. Last year, Seychelles became the first country after South Africa from Africa to issue a sovereign bond in the international market in the past two decades. A sovereign bond is a debt security issued by a national government within a given country and denominated in a foreign currency. It is normally used by countries whose economies are healthy to finance their development projects. The sovereign bonds are usually accessible to investors across the globe. The buyers of sovereign bonds in the international market are normally large institutional investors, such as investment banks, pension funds, mutual funds, commercial banks, insurance companies and national governments. As at 2006, only 40 percent of developing countries, 56 out of the 135 analysed, the report said, had issued sovereign bonds in the past 27 years. It revealed that by 2006, almost 90 percent of developing countries were able to access bank lending or syndicated loans, yet few of them have accessed private bonds.

This week’s bond listing makes Ghana the first post-HIPC debt relief candidate anywhere to access international capital markets.

Right on the heels of Ghana is Nigeria, which has been rated by the World Bank as also having a very vibrant private sector with a strong investment profile. To this end, the global financial institution has adjudged the country healthy enough to issue a sovereign bonds.

According to the report: "Financial flows to developing countries: Recent trends and prospects," Nigeria is ripe to begin the sale of sovereign bonds on the international market for the first time in its history. The World Bank said judging from Nigeria’s improved international credit rating, it is among four sub-Saharan countries that are expected to gain access to the private bond market.

The report listed the four countries that "could evolve significantly over the next few years" in the issuance of sovereign bonds for the first time as Ghana, Kenya, Nigeria and Zambia.