Cedi Performance and Macro-Economic Indicators
At the close of the first quarter of 2021, the year-to-date (YTD) appreciation rates of the cedi against the US dollar, the British pound and Euro were 0.55%, 0.03% and 5.25%, respectively. The appreciation of the Ghana cedi may be due to the Bank of Ghana (BOG) plans to sell USD775million in 2021 via 25 auctions to support the local currency. This move by the Central Bank may have been positively received by investors.
At the end of the March 2021, the inflation rate stood at 10.3% compared to 10.4% at the end of December 2020. Despite the non-food group recording a higher inflation rate of 10.0% in March 2021 compared to 7.7% in December 2020, the decline in March 2021’s inflation rate was driven by the food and non-alcoholic beverage group. The food and non-alcoholic beverage group recorded a decline in inflation rate from 14.1% in December 2020 to 10.8% in March 2021. This was due to a decrease in the prices of some food stuffs.
The Bank of Ghana maintained the monetary policy rate at 14.50% due to short-term pressures emanating from rising crude oil prices and direct and secondary price effects of the revenue generation measures (taxes) announced in the 2021 budget, which are mentioned later in the report.
The table below provides details of the rates and movement in the currency market.
Economic Review
| Q1 2021 | Q4 2020 | Change (YoY) | |
| Monetary Policy Rate | 14.50% | 14.50% | 0.00%  |
| Inflation Rate | 10.30% | 10.40% | 0.10% |
| Open (31st December, 2020) | Close (31st March, 2020) | Quarter Appreciation | |
| US Dollar to Ghana Cedi | 5.76 | 5.73 | 0.55%  |
| British Pound to Ghana Cedi | 7.87 | 7.87 | 0.03% |
| Euro to Ghana Cedi | 7.06 | 6.71 | 5.25% |
Government Borrowing
The 91-, 182- and 364-Day Treasury Bills began the first quarter of 2021 at 14.10%, 14.15% and 16.96%, respectively and decreased to 12.87%, 13.65% and 16.57%, respectively at the end of the quarter. On average, interest rates for the 91-Day, 182-Day and 364-Day T-bills were 13.51%, 13.96% and 16.82%, respectively. The government also issued a 2-Year Note, a 3-Year, a 5-Year and a 6-Year Bond at 17.60%, 17.70%, 18.30% and 19.25%, respectively. Compared to 4Q2020, interest rates of GoG securities at various maturities trended downwards.
The public debt issuance calendar for period covering January to March 2021 reveals government’s plans to issue cedi-denominated domestic debt securities amounting to GH₵22.35 billion from the domestic market. Of the targeted amount, GH₵19.73 billion will be used to rollover maturing domestic debts while the remaining GH₵3.05 billion would be fresh issuance geared towards government’s budgetary financing requirements. Short term securities (91-Day to 364-Day Treasury Bills) account for GH₵13.51 billion of the debt issuance, while longer term government debt securities (2-Year Treasury Notes to 20-Year Treasury Bonds) account for GH₵8.84 billion of the issuance. Government is expected to update the issuance calendar on a monthly rolling basis to reflect a full quarter’s financing programme.
In March 2021, the Government of Ghana (GoG) raised USD3.025 billion through Eurobonds. About USD2billion will be used to finance the 2021 budget, while the rest will be used to refinance Ghana’s debt. The transaction comprised of four tranches: 4-year zero coupon bond (USD 525 million), 7-year bond (USD 1 billion), 12-year bond (USD 1 billion), and 20-year bond (USD 1 billion). The interest rates for the 7-year, 12-year and 20-year bond were 7.75%, 8.625% and 8.875%, respectively. The 4-year zero coupon bond is Africa’s inaugural zero coupon bond issue.
| Q1 2020 | Q1 2021 | Difference | |
| 91 Day T-bill | 14.71% | 13.51% | 1.20%  |
| 182 Day T-Bill | 15.17% | 13.96% | 1.21% |
| 364 Day T-Bill | 17.78% | 16.82% | 0.96% |
| 2 Year T-Note | 19.82% | 18.05% | 1.77% |
| 3 Year T-Bond | 21.07% | 17.70% | 3.37% |
Stock Market Performance
The stock market recovered from its negative return in 2020 as the GSE Composite Index (GSE-CI) and GSE Financial Stock Index (GSE-FSI) closed 1Q2021 with a year to date (YTD) returns of 13.99% and 3.54%, respectively compared to -13.98% and -11.73% in December 2021. The improvement in the returns of the indices was due to price recoveries of some of the listed stocks, such as MTN and SCB, which are large market capitalization stocks.
The telecommunication sector can be said to be one of the sectors that thrived during the COVID-19 pandemic. This can be attributed to the increase in demand of ICT, data and voice services by individuals and companies during the pandemic. It is no surprise that MTN led the pack of gainers with a quarterly return of 32.81%. The banking sector is still in recovery mode, as most banks are still yet to overcome impact of COVID-19 on their operations. Some banks listed on the exchange however made some gains.
This is evident in the GSE-FSI which recorded a lower return of 3.54% compared to the GSE-CI which returned 13.99% at the end of the quarter. The increase in crude oil prices (USD 48.42 at the beginning of the year to USD 59.43 at the end of the first quarter) and refined petroleum products may have affected the operations of oil marketing companies (OMCs) such as GOIL as the company was unable to make significant gains. TOTAL on the other hand was able to brace this challenge and made some gains during the quarter. Manufacturing firms have still not recovered from the impact of the COVID-19 pandemic as they still have to battle with not being able to operate at full capacity in order to comply with social distancing protocols, as well as the cost of providing PPEs for staff.
During the quarter, there were 9 gainers. MTN was the top gainer with a quarterly return of 32.81%, closing the quarter at GH₵0.85. SOGEGH was the second largest gainer ending the quarter at GH₵0.75, which represented a 17.19% quarterly gain. The third gainer for the quarter was TOTAL which had a quarterly return of 11.31%. The other gainers were SCB, GCB, RBGH, EGL, FML and GOIL which gained 11.28%, 11.11%, 9.76%, 2.86%, 0.93% and 0.67%, respectively. On the other hand, UNIL led the pack of 5 losers, ending the quarter at GH₵6.06, this represents a quarterly loss of 26.90%. ACCESS lost the least during the quarter, its price dropped by 2.05%, closing the quarter at GH₵4.30. Prices of 17 stocks remained flat.
The performance of the gainers and losers during the first quarter of 2021 on the GSE has been outlined in the tables below.
Gainers
| Share | Year High (GH₵) | Year Low (GH₵) | 31st Dec 2020 (GH₵) | 31st Mar 2021 (GH₵) | Gain (%) |
| MTNGH | 0.85 | 0.64 | 0.64 | 0.85 | 32.81% |
| SOGEGH | 0.75 | 0.64 | 0.64 | 0.75 | 17.19% |
| TOTAL | 3.15 | 2.83 | 2.83 | 3.15 | 11.31% |
| SCB | 18.15 | 16.31 | 16.31 | 18.15 | 11.28% |
| GCB | 4.50 | 4.05 | 4.05 | 4.50 | 11.11% |
| RBGH | 0.45 | 0.41 | 0.41 | 0.45 | 9.76% |
| EGL | 1.44 | 1.40 | 1.40 | 1.44 | 2.86% |
| FML | 1.09 | 1.08 | 1.08 | 1.09 | 0.93% |
| GOIL | 1.51 | 1.50 | 1.50 | 1.51 | 0.67% |
Losers
| Share | Year High (GH₵) | Year Low (GH₵) | 31st Dec 2020 (GH₵) | 31st Mar 2021 (GH₵) | Loss (%) |
| UNIL | 8.29 | 6.06 | 8.29 | 6.06 | -26.90% |
| ETI | 0.08 | 0.07 | 0.08 | 0.07 | -12.50% |
| ALW | 0.11 | 0.10 | 0.11 | 0.10 | -9.09% |
| CAL | 0.83 | 0.64 | 0.69 | 0.64 | -7.25% |
| ACCESS | 4.39 | 4.30 | 4.39 | 4.30 | -2.05% |
Developments in the Capital Market
During the quarter, Mechanical Lloyd Plc. (MLC) began the process of delisting from the Ghana Stock Exchange, MLC has offered to purchase the outstanding shares at GHS0.10 per share, representing a premium of 11.1% compared to the prevailing market price of GHS0.09 per share. The delisting date has been set for 16th April, 2021.
During the quarter, Unilever Ghana Plc. notified investors of the company’s plans to separate its tea business to form a separate legal entity in Ghana. The process will likely involve shareholder approval at a point but this is will not adversely affect the process as Unilever Overseas Holdings holds majority stake in Unilever Ghana Plc. (about 74.5% equity stake).
2021 Budget Highlights
The 2021 budget review presented by the Minister of Parliamentary Affair, Majority Leader and leader of Government Affairs in March 2021. From the budget, the Government intends to achieve a real GDP growth from a projected outturn of 0.9% for 2020 to 5.0% in 2021, reduce inflation rate from 10.4% in 2020 to 8.0% in 2021, as well as reduce overall fiscal budget deficit from 11.7% in 2020 to 9.5% in 2021.
Revenue to GDP dropped from 15.3% to 14.4% and expenditure to GDP increased from 20.1% to 26.1%. The drop in revenue and increase in expenditure may have an unfavourable effect as government may have to increase taxes to increase revenue or government may have reduce its expenditure, which may affect some government flagship programmes, as wage bills, interest payments as compulsory expenditures of government.
The Government also introduced the following taxes:
- 1% CoVID-19 Health Levy
- Taxation of the Digital Economy
- 10 pesewas Sanitation and Pollution Levy
- 5% financial sector clean-up levy
- 20 pesewas Energy Sector Recovery Levy
- 1% increase in VAT Flat Rate (3% to 4%)
A 30% income tax rebate for companies operating hotels and restaurants, education, arts, entertainment, travel and tours from April to December 2021, was introduced. This rebate will positively impact operations of these companies as cash flows for tax payment can be reinvested to increase profits after the devastating effect the COVID-19 pandemic has had on these sectors. Also, the suspension of instalment of income tax stamp and vehicle income tax payment from April to December 2021, will improve the livelihood of workers in the informal sector, as well as commercial drivers as they can reinvest cash flows for tax payment to expand their business. The decision to extend the exemption of income tax on capital gains made from the sale of securities listed on the GSE beyond 2021, will also encourage growth of the capital market as investors will not be discourage from participating in the market as a result of potential reduction of returns due to taxes.
Current Economic Environment and Investment Implications
The cedi appreciated marginally during the first quarter of 2021, which can be attributed to investors positively reacting to the BoG planned foreign exchange auction during the year. Hence, the cedi is likely to remain relatively stable during the next quarter.
On the capital market, the GSE Composite and GSE Financial Stock Indices recovered from their last year losses due to price appreciation of some of the listed stocks. The stock markets ability to sustain this rally will be dependent on the 2020 audited financial statements that will be released in the early part of next quarter.
As the yields of newly issued securities trend downwards, the Ghana Fixed Income Market presents buying opportunities for both short and long term investors, who seek securities with higher yields to maximise their returns.
