Ghana taps into international capital markets to raise $3bn

The International Monetary Fund recently revised Ghana's growth rate for the year to 4.6 per cent, a positive indication of the country's economic performance amidst global challenges. This revision comes in the wake of Ghana's successful $3 billion raise on the international debt market using a four-year zero-coupon bond, a first for the African continent. Rand Merchant Bank played a pivotal role in leading the execution of the Eurobond, showcasing its expertise in international debt markets. Eyitayo Netufo, Head of International Debt Markets at Rand Merchant Bank, sheds light on the dynamics of this groundbreaking transaction and its implications for Ghana and other African sovereigns. One of the key aspects of the zero-coupon Eurobond issuance is the risk it poses to investors. Netufo explains that while such bonds may be more volatile due to their lack of regular interest payments, they appeal to a specific segment of investors who prioritize capital appreciation over regular cash distributions. The strategic structuring of the bond by Rand Merchant Bank ensured that it was priced fairly to account for the absence of coupons, making it an attractive proposition for those seeking long-term investments. Ghana's success in raising the Eurobond can be attributed to a combination of investor appetite for yield in emerging markets and the country's credibility as a repeat issuer in the international debt markets. Netufo emphasizes that Ghana's decision to utilize the bond proceeds for refinancing expensive domestic debt demonstrates a prudent financial strategy that is likely to benefit both the country and its investors in the long run. Furthermore, the favorable response to Ghana's Eurobond issuance has not gone unnoticed by other African sovereigns. Nigeria, for instance, is exploring its own market entry this year and is already seeking advisors for a potential issuance. Netufo believes that the increased willingness of investors to embrace emerging market risk, coupled with a growing understanding of African credits, bodes well for countries like Nigeria, Kenya, and South Africa. The success of Ghana's issuance sets a positive precedent for other African nations and underscores the importance of engaging African-Focused banks to convey the unique narratives of these sovereigns to international investors. In a post-COVID world where investment opportunities are scrutinized more closely, African countries are presented with a window to attract global capital by showcasing their creditworthiness and strategic financial planning. The competition for investor attention in the international debt markets necessitates a sophisticated understanding of investor preferences and a proactive approach to articulating compelling investment cases. As African sovereigns continue to navigate the evolving global financial landscape, leveraging regional expertise and telling their own credit narratives will be essential in securing successful market outcomes.