Ghana’s fixed income market has started 2025 on a high note, with trading volumes and values surging compared to last year. Investors seem to be warming up to government bonds again, but beneath the numbers, there are some critical red flags. Foreign investors are pulling back. Corporate bonds are struggling. Banks are leaning heavily on repo transactions to manage liquidity. So, is this a sign of real economic recovery, or are we simply witnessing a temporary burst of optimism? More importantly, how do these bond market movements tie into the bigger picture of Ghana’s economic direction?
The Numbers: A Strong Start, But…
The Ghana Fixed Income Market (GFIM) saw a 16.9 billion GHS trading volume in January 2025—a 13.74% increase from last year. Even more impressive, the total trade value jumped 22.4% to 13.97 billion GHS. In simple terms: More people are buying and selling bonds, and at higher prices. This suggests that confidence in Ghana’s debt market is improving, but the key question remains: Are investors truly optimistic, or is this a temporary flight to safer assets?
Why Are Government Bonds Still King?
When economic uncertainty looms, investors tend to park their money in low-risk assets—and government securities are at the top of that list. This was evident in January, as 91-day, 182-day, and 364-day Treasury Bills made up a massive 11.3 billion GHS in trades. Government bonds (ranging from 2 to 15 years) also continued to attract long-term investors. Institutional investors—banks, pension funds, and insurance companies—are still dominating the market. This flight to safety reflects both confidence and caution. On one hand, investors trust the government’s ability to repay, but on the other, the lack of investment in corporate bonds signals limited confidence in Ghana’s private sector.
This brings us to a major issue.
Corporate Bonds: Where Are They?
Ghana’s private sector is struggling to tap into the bond market for funding. Only 253 million GHS in corporate bonds were traded—barely 1.5% of total market activity. Bayport Savings and Loans, Izwe Plc, and Kasapreko were among the few corporate issuers. The big question is why? Investors still prefer government-backed debt, which is perceived as less risky than corporate securities. A vibrant corporate bond market allows businesses to raise funds at lower interest rates, instead of relying solely on bank loans (which are often expensive). If businesses don’t get access to cheaper capital, they can’t expand, hire more workers, or invest in new projects. This ultimately slows down economic growth and job creation. While Ghana’s bond market is booming, it’s heavily skewed toward government borrowing, leaving private enterprises starved of capital.
Foreign Investors: Missing in Action
One worrying trend in the January 2025 GFIM report is the continued decline in foreign investor participation. Foreign sell trades fell from 13.1 billion GHS (Jan 2024) to just 1.66 billion GHS (Jan 2025). Foreign buy trades also dropped to 1.67 billion GHS. This is not good news because foreign investors bring in much-needed capital, which helps stabilize the cedi and boosts liquidity.
Why Are Foreign Investors Pulling Out?
One major reason is cedi depreciation risks. The cedi remains under pressure, and foreign investors don’t want to lose money due to currency fluctuations. Another key factor is Ghana’s sovereign risk rating. While Ghana’s credit rating has stabilized, it’s still below investment grade, making it less attractive to risk-averse investors. On a global level, the U.S. Federal Reserve and the European Central Bank are keeping interest rates high, which means investors can get safer returns elsewhere. If Ghana wants to win back foreign investors, the government needs to demonstrate fiscal discipline, improve transparency, and ensure currency stability.
Repo Transactions: A Red Flag?
One of the most surprising numbers in the January 2025 GFIM report was the massive rise in repo transactions. Repo transactions hit 40.1 billion GHS, up nearly 400% from last year’s 9.4 billion GHS. What does this mean? Banks are borrowing heavily from each other, using bonds as collateral. This suggests short-term liquidity pressure in the banking sector. If banks are struggling to access cash, it could indicate broader financial stress. This is not necessarily a crisis, but it’s something the Bank of Ghana needs to monitor closely.
The So what!
Despite strong trading activity in January, the real test will be whether this momentum lasts throughout 2025. Can the government manage its debt without spooking investors? Will Ghana attract foreign capital back into bonds? Can we develop a strong corporate bond market? Time will tell.
