Ghana to Boost Bond-Price Transparency With Exchange Reporting

Ghana plans to boost transparency in bond trading by reporting prices for benchmark government debt to the stock exchange, letting investors in West Africa’s second-biggest economy see changes in the figures more quickly.

Central Securities Depository Ghana Ltd., which tracks trades in government and central bank debt, is set to merge with the Ghana Stock Exchange’s register by the end of June, Chief Executive Officer Stephen Tetteh said in an e-mailed response to questions in Accra, the capital, on April 24. By July, prices will be sent to the bourse, bringing Ghana closer in line with South Africa and Nigeria, the continent’s two most liquid markets, where bonds are traded over-the-counter with transactions reported to the exchanges and price providers.

“The market must know what is happening,” Tetteh said. “We are working with the stock exchange to stream our information to them.”

Ghana’s benchmark three-month borrowing costs are the second-highest among sub-Saharan African countries tracked by Bloomberg at almost 23 percent. The nation’s bourse is the world’s best performing equities gauge this year with a 45 percent gain, even as a lack of liquidity leaves investors searching for ways to buy in. Two-, three- and five-year debt are listed on the market while trading is done over-the-counter. After the merger, 91- and 182-day Treasury bills and one-year bonds may also be listed, while over-the-counter trading will continue, Tetteh said.

Foreign Capital

Foreign investors can’t buy securities with terms below two years on the primary market, although they can in secondary trading, Adams Nyinaku, head of treasury at the Bank of Ghana said on April 12.

Making government debt more transparently traded “should provide a greater level of comfort to non-resident investors, which could help increase foreign capital inflows,” Angus Downie, London-based head of economic research at Ecobank Transnational Inc. (ETI), said in an e-mailed response to questions on April 25.

Interest in Ghanaian issues has been rising, with almost 25,000 new accounts opened at the central bank’s depository in the first quarter from about 12,000 in the same period a year before, Tetteh said.

While greater transparency may boost demand, Downie said there may still not be enough bonds to buy as the world’s second-biggest cocoa producer struggles with a lack of liquidity.

Illiquid Market

“The local market is relatively illiquid, and dominated by buy-and-hold investors,” he said. “In practice there may not be a significant boost to trading from this move.”

The merged depository may decide whether to list all government and central bank securities on the stock exchange and allow debt trading similar to the equities, Tetteh said.

“It does not matter whether the transaction is on the exchange or through the over-the-counter market,” he said. “The important thing is the current price at which the security is trading should be available to the market.”

To contact the reporter on this story: Moses Mozart Dzawu in Accra at mdzawu@bloomberg.net

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net

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