Cedi Performance and Macro-Economic Indicators
At the end of the third quarter, the cedi depreciated against the US Dollar, the British pound, and the Euro by 37.5%, 24.1%, and 27.5%, respectively on a year-to-date (YTD) basis. The depreciation of the Ghana cedi relative to the major currencies can be attributed to foreign investors reducing their exposure to local bonds due to the three credit rating agencies (Fitch, S&P and Moody’s) downgrading of the country’s bonds to junk status. Ghana’s inability to access the international bond market to support its foreign reserves, can also be considered as a factor for the depreciation of the cedi. Another factor is the Russia-Ukraine war. The war had a negative impact on the global supply chain, disrupting the flow of goods which consequently led to sharp price increases for commodities of which Russia and Ukraine are large global suppliers. Ghana’s dependence on imports resulted in an increase in the demand for foreign currency, leading to further depreciation of the cedi and high inflation rates.
The headline inflation rate accelerated to 37.20% at the end of September 2022 compared to 29.80% at the end of June 2022. Food and non-food inflation for the end of September 2022 were 37.80% and 36.80% respectively, as compared to that of June 2022 which were 30.70% and 29.10% respectively. The hike in the inflation rate at the end of the third quarter can be attributed to rising utility tariffs, fuel prices, cost of housing, transport, and food and beverages.
The Bank of Ghana raised the monetary policy rate to 22.00% in August citing the increase in inflation in the month of July, heightened demand pressures in the foreign exchange market, uncertainties in the global economy, and rising inflation in many advanced economies are the basis for the tightening of the monetary policy rate.
The table below provides details of the policy rate, inflation rate, and movements in the currency market.
Economic Review
| Q2 2022 | Q3 2022 | Change (Quarter) | |
| Monetary Policy Rate | 19.00% | 22.00% | 3.00%  |
| Inflation Rate | 29.80% | 37.20% | 7.40% |
| Close (30th June 2022) | Close (30th September 2022) | Quarter Depreciation | |
| US Dollar/Ghana Cedi | 7.23 | 9.60 | 24.68%  |
| British Pound/Ghana Cedi | 8.80 | 10.70 | 17.72% |
| Euro/Ghana Cedi | 7.58 | 9.40 | 19.36% |
Government Borrowing
Interest rates on the 91-, 182- and 364-Day Treasury Bills began the third quarter of 2022 at 25.88%, 26.57%, and 27.49% respectively, and ended the quarter at 30.18%, 31.34%, and 30.47% respectively. The government also issued a 3-Year bond at 29.85%. Compared to the third quarter of 2021, interest rates of all GoG securities have trended upwards.
| Q3 2021 | Q3 2022 | Difference | |
| 91 Day T-Bill | 12.49% | 30.45% | 17.96% |
| 182 Day T-Bill | 13.22% | 31.57% | 18.35%  |
| 364 Day T-Bill | 16.14% | 31.55% | 15.41% |
| 2 Year T-Note | 17.50% | 22.25% | 4.75% |
| 3 Year T-Bond | 17.70% | 28.9% | 11.20% |
| 5 Year T-Bond | 18.80% | 27.19% | 8.39% |
At the end of the third quarter 2022, we have an inverted yield curve (that is, lower interest rates on long maturity bonds). This will make it difficult to issue longer term bonds without a significant maturity premium.
Stock Market Performance
The GSE Composite Index (GSE-CI) and GSE Financial Stock Index (GSE-FSI) closed the third quarter of 2022 with year-to-date (YTD) returns of -11.80% and -3.80%, respectively compared to 47.06% and 15.28% at the end of September 2021. The GSE-FSI performed better than the GSE-CI due to major price recoveries in the following listed financial stocks – ACCESS, TBL, and SIC.
During the quarter, there were 4 gainers. ACCESS was the top gainer with a quarterly return of 59.76%, closing the quarter at GH₵4.01. The second gainer for the quarter was TBL with a quarterly return of 9.09%. BOPP was the third gainer ending the quarter at GH₵6.48, which represented an 8.00% quarterly gain. SIC was the fourth gainer ending the quarter at GH₵0.33, representing a quarterly gain of 6.45%. On the other hand, GCB led the pack of 12 losers, ending the quarter at GH₵4.00, representing a quarterly loss of 20.00% followed by SOGEGH ending the quarter at GH₵1.00, which represented a 15.25% quarterly loss. The other losers were EGH, ETI, UNIL, CMLT, GGBL, EGL, MTNGH, GOIL, SCB, and MAC which lost 12.63%, 11.76%, 9.58%, 9.09%, 8.89%, 3.03%, 2.22%, 2.21%, 0.69%, and 0.19% respectively. Prices of 14 stocks remained flat.
The performance of the gainers and losers during the third quarter of 2022 on the GSE is detailed in the tables below.
Gainers
| Share | Year High | Year Low | 30th June 2022 (GH₵) | 30th Sept 2022 (GH₵) | YTD Gain | Quarter Gain | |
| ACCESS | 4.01 | 1.90 | 2.51 | 4.01 | 27.30% | 59.76% | |
| TBL | 0.48 | 0.34 | 0.44 | 0.48 | 41.18% | 9.09% | |
| BOPP | 6.65 | 6.00 | 6.00 | 6.48 | 2.56% | 8.00% | |
| SIC | 0.33 | 0.08 | 0.31 | 0.33 | 312.50% | 6.45% |
Losers
| Share | Year High | Year Low | 30th June 2022 (GH₵) | 30th Sept 2022 (GH₵) | YTD Loss | Quarter Loss | |
| GCB | 5.24 | 3.7 | 5.00 | 4.00 | 23.66% | 20.00% | |
| SOGEGH | 1.20 | 0.96 | 1.18 | 1.00 | 16.67% | 15.25% | |
| EGH | 7.60 | 6.50 | 7.60 | 6.64 | 12.63% | 12.63% | |
| ETI | 0.20 | 0.13 | 0.17 | 0.15 | 7.14% | 11.76% | |
| UNIL | 5.89 | 5.31 | 5.89 | 5.31 | 9.85% | 9.85% | |
| CMLT | 0.11 | 0.10 | 0.11 | 0.10 | 9.09% | 9.09% | |
| GGBL | 2.22 | 1.80 | 2.25 | 2.05 | 13.89% | 8.89% | |
| EGL | 3.30 | 2.79 | 3.30 | 3.20 | 14.70% | 3.03% | |
| MTNGH | 1.11 | 0.75 | 0.90 | 0.88 | 20.72% | 2.22% | |
| GOIL | 1.82 | 1.77 | 1.81 | 1.77 | 2.75% | 2.21% | |
| SCB | 20.30 | 20.16 | 20.30 | 20.16 | 0.69% | 0.69% | |
| MAC | 5.39 | 5.38 | 5.39 | 5.38 | 0.19% | 0.19% |
Current Economic Environment and Investment Implications
Provisional real quarterly GDP growth rate for second quarter 2022 was 4.8% compared to 4.2% in the same period in 2021. However, current economic predicaments such as the rising inflation rates and the depreciation of the cedi will decelerate the growth of the economy and reduce GDP growth rate to about 3.6%[1] during the next quarter.
The government is in its second phase of negotiations with the International Monetary Fund (IMF) for support to restore macroeconomic stability and strengthen debt sustainability. The country’s high interest rate and low revenue generation have increased the likelihood that IMF support may come with some significant conditionalities. It is not surprising that the government is set to begin talks with domestic bondholders on restructuring of its local-currency debt as part of Ghana’s plan to secure a US$3 billion loan from the IMF. The restructuring is part of a debt-stability plan required by the IMF and could take the form of haircuts on principal and interest payments and extension of maturities.
The cedi is likely to further depreciate during the fourth quarter due to the increasing rate of importation, and demand pressures on the dollar.
Interest rates are expected to inch upward to make local bonds more attractive to help raise capital for the government amidst the economic uncertainties as the government awaits the IMF bailout.
On the capital market, the returns of the GSE Composite Index are likely to drop due to the:
- Government’s plan to restructure its domestic debt. This will have a negative impact on the profit of the listed banks, as their assets are mostly Government of Ghana securities.
- Depreciation of the cedi. This will have a negative impact on manufacturing companies such as FML, UNIL, DASPHARMA, etc., and Bulk Oil Distributors like GOIL and TOTAL, as the cost of importation of their raw materials and finished products will increase.
