BoG Encourages Corporate Sector to Utilize Bond Market Amid Improved Conditions

Accra: The Bank of Ghana (BoG) is advocating for companies to increase their reliance on Ghana's debt capital market for long-term financing as falling interest rates and the reopening of the domestic bond market provide opportunities for businesses to lessen their dependence on bank credit. According to Ghana Web, Governor Dr. Johnson Pandit Asiama emphasized the central bank's expectation of increased participation by corporate and quasi-government issuers. This move is driven by improving macroeconomic conditions that are restoring confidence in fixed-income securities and broadening financing avenues beyond government debt. This initiative follows the government's return to the domestic bond market earlier this year, marking the first issuance since 2022 after the Domestic Debt Exchange Programme (DDEP) imposed a three-year restriction. The issuance of a seven-year cedi-denominated bond in April facilitated the re-establishment of the sovereign yield curve, which is critical for pricing corporate bonds and other private debt instruments. Dr. Asiama highlighted the importance of government securities in providing the benchmark for corporate debt pricing, thus underscoring the need for a credible yield curve to foster the development of long-term private-sector financing. The reduction in interest rates, supported by Ghana's disinflation and monetary easing, has been pivotal in enhancing financing conditions. The decline in the 91-day Treasury bill rate from over 35 percent in early 2023 to single digits has bolstered demand for government securities. This environment is crucial for companies issuing debt, as government securities set the risk-free benchmark, requiring corporate issuers to offer a premium for additional credit risks. As macroeconomic conditions improve and interest rates moderate, the BoG aims to see a reduction in the dominance of government securities in Ghana's debt capital market. Dr. Asiama expressed the desire for increased private-sector issuance, emphasizing the need to address str uctural and regulatory barriers to make market financing more accessible. By expanding the corporate debt market, Ghanaian companies could access long-term financing aligned with long-term investments, reducing the reliance on short-term bank facilities. This shift would also offer institutional investors, such as pension funds and insurers, alternatives to government securities, potentially channeling more domestic savings into corporate investments. COCOBOD's intention to finance the 2026/27 cocoa season through commercial paper, targeting US$1 billion, exemplifies the growing potential of the Ghana Fixed Income Market as a financing source for businesses. This marks a significant change from the 2022 debt crisis when market disruptions limited long-term financing options. Improved macroeconomic conditions are reversing previous pressures, with inflation dropping to 4.6% in July 2026 from a peak of 54.1% in December 2022. The central bank anticipates maintaining inflation within its target band through t he year, supported by a strengthened external position and increased trade surplus. Institutional investors, bolstered by the stronger economic environment, are returning to government securities, rebuilding the capital pool that could support private debt issuance. However, for corporate financing to flourish, companies must present competitive instruments while adhering to enhanced disclosure and investor-protection standards. The BoG is focusing on removing barriers to corporate issuance, improving market infrastructure, and enhancing liquidity as the domestic debt market recovers. Successfully expanding beyond government securities would enable Ghanaian companies to access institutional capital directly for growth, reducing reliance on bank financing.