As an experienced banker in the Ghanaian financial sector, with extensive knowledge of treasury operations and investment strategies under the Bank of Ghana’s regulatory framework, I believe the massive interest in Ghanaian government securities, such as the 1-year Fixed Rate (FXR) Bond referenced in the tender results from March 2020, stems from a combination of economic, regulatory, and market factors. These securities, including Treasury bills, notes, and bonds, have become highly attractive to both local and foreign investors due to their risk-return profile, especially in the context of Ghana’s economic landscape around 2020. Below, I outline the key reasons, drawing on practical insights from the post-banking sector cleanup era (2017-2019) and the onset of the COVID-19 pandemic, which influenced investor behavior.

• High Yields and Attractive Returns: The accepted rate of 20.75% per annum for the 1-year FXR Bond is significantly higher than rates in many developed markets and even some emerging ones. In March 2020, Ghana’s Treasury market offered competitive yields, with short-term instruments like 91-day T-bills around 14-15% and longer-term bonds exceeding 20%, providing strong nominal returns. This is particularly appealing in an environment where inflation was around 7-10%, yielding positive real returns. Investors, including banks and pension funds, flock to these for income generation, especially post the 2017-2019 banking cleanup, where surviving banks like GCB and Ecobank Ghana shifted portfolios toward safer, high-yield government paper to meet BoG’s Capital Requirements Directive (CRD) and Liquidity Risk Management Guidelines. High interest costs for the government (projected at nearly 47% of revenue in subsequent years) necessitated these elevated rates to attract funding, creating a virtuous cycle for investors.
• Perceived Safety and Low Risk: Government securities are considered sovereign-backed, offering low default risk compared to corporate loans or equities, aligning with Basel II/III principles adapted in Ghana via BoG directives. In the wake of the banking sector cleanup, which saw collapses like UT Bank due to non-performing loans, investors sought refuge in risk-free assets. The Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930), encourages banks to hold high-quality liquid assets (HQLA) like these bonds for liquidity buffers. Additionally, during the early COVID-19 period (Ghana recorded its first case in March 2020), global uncertainty drove a flight to safety, boosting demand for stable investments.
• Liquidity and Ease of Access: These securities are highly liquid, traded on the Ghana Fixed Income Market (GFIM) under the Ghana Stock Exchange, allowing quick entry and exit. BoG’s monetary policy tools, including open market operations, ensure market depth. For corporate entities and multinationals, this liquidity aids treasury management, hedging against currency risks via instruments like FXR bonds, which may have foreign exchange linkages. Institutional investors, such as pension funds regulated under the National Pensions Act, 2008 (Act 766), are mandated to allocate portions to government securities, further driving demand.
• Diversification and Portfolio Management: From an investment analysis perspective, as per the syllabus on risk and return, these bonds offer diversification benefits with low correlation to equities or commodities. In 2020, amid falling cocoa and oil revenues due to global lockdowns, investors diversified away from volatile sectors. Foreign portfolio investors, attracted by carry trade opportunities (borrowing low abroad and investing high in Ghana), contributed to inflows, though this exposed the economy to hot money risks under BoG’s cross-border risk assessments.
• Economic and Policy Context: Ghana’s government borrowed heavily to finance deficits, exacerbated by COVID-19 expenditures and revenue shortfalls in 2020, leading to increased issuance of securities. The Investment Climate Statements highlight favorable prospects for diversification, but high public debt (rising post-2020) made domestic funding via bonds crucial to avoid external debt pressures. BoG’s forward sales of USD and other interventions stabilized the cedi, making cedi-denominated bonds more appealing. Moreover, disintermediation trends (e.g., direct issuance bypassing banks) widened the investor base, including retail via apps like the Treasury Mobile App.
• Regulatory and Institutional Incentives: Post-DDEP (2022-2024) reflections aside, in 2020, BoG’s Sustainable Banking Principles encouraged ethical investments, with government bonds seen as supporting national development. Rating agencies like Fitch noted high yields amid financing challenges, drawing interest despite sovereign risks. For multinationals, these align with corporate treasury management, hedging interest rate exposures via tools like FRAs or swaps, as per syllabus content.

In summary, the combination of high yields, safety, liquidity, and economic necessities in 2020 created a compelling case for massive investor interest. However, this reliance on domestic debt raised long-term sustainability concerns, as seen in later debt restructuring. Practically, banks like Stanbic Ghana have profited from such holdings, but diversification remains key for resilience under BoG oversight.