The International Finance Corp. is seeking advisers for the sale of local-currency bonds in Ghana, expanding an African debt program that started with an issue in Zambia that attracted demand five times the amount offered.
The World Bank unit, which received approval from Ghana regulators in August to sell 2 billion cedis ($880 million) under its Pan-Africa Domestic Medium-Term Note Programme, is studying proposals from local and international lenders, Andrew Cross, the IFC’s manager of Treasury Client Solutions for Africa, said by phone from Washington on Nov. 18.
“We’re currently looking through a list of banks that are interested in playing a financial advisory role,” he said, without naming the lenders. “We’re in touch with the Securities and Exchange Commission, the Ghana Stock Exchange and the Bank of Ghana to give us their support once we settle on the advisers.”
The IFC is in talks with the governments of Botswana, Kenya, Namibia, Rwanda, South Africa, and Uganda about taking part in the program as it seeks to tap economic growth in sub-Saharan Africa that the International Monetary Fund estimates will reach 5 percent this year, compared with 2.9 percent globally. Africa may become the IFC’s biggest portfolio over the next three years, Chief Risk Officer Saadia Khairi said in an interview in Frankfurt on Nov. 19.
The IFC’s plans to issue cedi debt comes as yields on Ghana’s benchmark 91-day Treasury bills drop to the lowest since June 2012, falling 410 basis points, or 4.1 percentage points, to 19 percent from this year’s peak reached in February. In June, the IFC said Ghana’s high borrowing costs made it difficult for bond sales to begin. Cross declined to comment on whether yields were now low enough.
Ghana’s inflation rate, which rose to highest level this year of 13.1 percent in October, and a budget deficit forecast by the Finance Ministry to reach 10.2 percent of gross domestic product in 2013, may weigh on yields if it prompts a central bank rate increase, said Angus Downie, London-based head of economic research at Ecobank Transnational Inc.
“Higher inflation makes it more likely that we’ll have the Bank of Ghana decide to raise the monetary policy rate,” he said by phone yesterday. “That higher policy interest rate feeding into the rest of the economy will have some impact on the 91-day Treasury-bill rate.”
Inflation accelerated as the cedi plummeted 15 percent against the dollar this year, the worst performer in West Africa. It strengthened 0.9 percent to 2.2439 per dollar by 12:40 p.m. in Accra.
The IFC announced its pan-African debt plans in May last year and debuted the program with the sale of 150 million Zambian kwacha ($27 million) of four-year Zambezi notes in September in an offer that was 4.8 times oversubscribed. Standard Bank Group Ltd. and Stockbrokers Zambia Ltd. arranged the sale, the IFC said in a Sept. 19 statement.
The IFC will issue three-year to 10-year bonds in Ghana with proceeds used to support companies in agriculture, manufacturing and infrastructure, Cross said.
“The medium-term note program is in part meant to support the development of the capital markets in African countries,” he said.
The lender’s investments in Africa include power projects in Burundi and Ivory Coast, a trade-finance facility for a Ghanaian bank and the arranging of debt for a Togo container terminal.
Funds raised from African bonds will be used for projects in the local countries, according to the IFC. The lender has issued bonds in 13 local currencies globally, including 10 billion Indian rupees ($160 million) of three-year notes on Nov. 20, it said in a statement.
In Nigeria, the IFC is working with regulators to issue a series of local-currency bonds totaling $1 billion to finance private-industry projects in power and housing as well as support the development of small- and medium-term enterprises, said Cross, who declined to say when sales will start.
“We believe that increasing access to local-currency finance by key sectors in the region will, in the long run, create growth and reduce poverty,” he said.