Ghana starts market for short-term debt as it revamps some loans

Ghana has started a market for trading short-term debt, a platform that builds on the fixed income market created more than eight years ago, and comes as the country restructures debt to make it sustainable under an International Monetary Fund program.

The market for selling and buying of commercial paper provides the avenue for companies and organizations seeking to issue debt within the shortest possible time frame to do so and for investors to find enhanced credit worthiness, Managing Director of the Ghana Stock Exchange Abena Amoah, said in the capital, Accra.

“I’m excited to see the diverse business community here and I believe that this CP market we are launching today will provide you with viable solutions to meet some of your short-term financing needs,” Amoah said Friday.

The commercial paper market has existed in Ghana for some time but operated on a small scale, with low liquidity and less regulation.

The formal launch comes to complement the fixed income market introduced in August 2015 for trading government and corporate bonds. It’s starting at a time that the West African nation is reorganizing almost all of its debt, estimated at $43.6 billion, as part of conditionalities agreed under a $3 billion program with the IMF.

Ghana, which concluded a domestic debt rework last year and reached a pact in principle with bilateral lenders early this year, is looking to secure a permanent debt revamp deal on $13 billion with Eurobond investors by the end of May. An earlier agreement with bondholders was rejected by the Washington-based lender for not meeting debt sustainability thresholds.

Companies must have a net worth of 5 million cedis ($357,485) to qualify to issue on the market, Wilson Nelson, President of Ghana Securities Industry Association, said. They must be ready to offer a minimum of 1 million cedis of instruments that can have a duration of as short as 15 days to 275 days, he said.

“With the introduction of the commercial paper market in Ghana, the plan to diversify the investment space and investor base is now fully on course,” Ernest Addison, Governor of the Bank of Ghana said in a speech read on his behalf. “This diversification helps small and medium-scale enterprises and emerging businesses struggling to access the traditional financial channels.”