Cedi Performance and Macro-Economic Indicators
Ghana’s currency at the end of the first quarter of 2023 depreciated against the major currencies. The cedi depreciated by 22.13%, 24.30%, and 23.57% against the US Dollar, the British pound, and the Euro respectively on a year-to-date (YTD) basis. The depreciation of the Ghana cedi relative to the major currencies during the quarter can be attributed to capital flight due to the hike in the interest rates by the U.S Federal Reserve, the seasonal high demand for foreign exchange during the last quarter and the repatriation of profits to parent companies outside the country. The government’s measures to help control the cedi’s depreciation include the successful delivery of the Domestic Debt Exchange Programme (DDEP) and the gold for oil swap, which have helped to improve investor confidence and reduce the demand for foreign exchange.
Ghana’s inflation rate has been rising since May 2021 due to the persistent rise in prices of petroleum products, food, and other consumer goods. It peaked at 54.10% at the end of the year 2022. The headline inflation rate gradually reduced during the first quarter of 2023, ending the quarter at 45.00%. The non-food inflation trended downwards from 49.90% in December 2022 to 40.60% in March 2023. Food inflation also trended downwards from 59.70% in December 2022 to 50.80% in March 2023. The fall in the inflation rate during the first quarter of 2023 can be attributed to a fall in prices of utility tariffs, fuel prices, household equipment, transport, and food and beverages.
The Bank of Ghana raised the monetary policy rate (MPC) from 27.00% to 29.50% in March 2023. The rationale for the hike was to place the economy on the path of stability and accelerate the pace of disinflation as the inflation rate is currently above the Central Bank’s medium-term target band.
The table below provides details of the policy rate, inflation rate, and movements in the currency market.
Economic Review
| Q4 2022 | Q1 2023 | Change (YoY) | |
| Monetary Policy Rate | 27.00% | 29.50% | 2.50%  |
| Inflation Rate | 54.10% | 45.00% | 9.10%  |
| Close (31st December 2022) | Close (31st March 2023) | Quarter Depreciation | |
| US Dollar/Ghana Cedi | 8.58 | 11.01 | 22.13%  |
| British Pound/Ghana Cedi | 10.31 | 13.62 | 24.30% |
| Euro/Ghana Cedi | 9.15 | 11.97 | 23.57% |
Fixed Income Market
Primary Market
Interest rates on the 91-, 182- and 364-Day Treasury Bills began the first quarter of 2023 at 35.36%, 35.98%, and 35.89% respectively, and ended the quarter at 18.88%, 21.44%, and 25.66%, respectively. The drastic reduction in interest rates is part of the government’s efforts to reduce its cost of borrowing. The government did not issue long-term notes or bonds during the quarter.
| Q1 2022 | Q1 2023 | Difference | |
| 91 Day T-Bill | 12.92% | 32.20% | 19.28% |
| 182 Day T-Bill | 13.40% | 33.00% | 19.60% |
| 364 Day T-Bill | 16.88% | 33.42% | 16.54% |
| 2 Year T-Note | 18.05% | – | – |
| 3 Year T-Bond | 17.70% | – | – |
| 5 Year T-Bond | 18.30% | – | – |
Secondary Market
Total volumes traded on the GFIM market declined by 61% to GH₵24.7 billion during quarter one (1) 2023 from the same period in the previous year. The decline in volumes traded on the secondary market can be attributed to the new bonds that were issued through the DDEP. The new bonds, which constitute about 80% of the outstanding government bonds, were thinly traded during the quarter.
The tables below provide details on the performance of government and corporate securities during the quarter.
| Jan-March 2023 | Jan-March 2022 | Change | |
| Treasury bills | 10,752,436,962 | 2,532,535,400 | 325% |
| Government bonds | 9,255,558,225 | 56,103,284,341 | -84% |
| Corporate bonds | 4,748,082,079 | 5,432,359,753 | -13% |
| Total | 24,756,077,266 | 64,068,179,494 | -61% |
| Jan-March 2023 | Jan-March 2022 | Change | |
| Treasury bills | 10,108,748,538.00 | 2,502,860,082.00 | 304% |
| Government bonds | 8,260,039,968.00 | 57,266,305,320.00 | -82% |
| Corporate bonds | 2,257,703,030.34 | 5,201,951,991.00 | -57% |
| Total | 20,626,491,537.00 | 64,971,117,392.00 | -68% |
Stock Market
The GSE Composite Index (GSE-CI) and GSE Financial Stock Index (GSE-FSI) closed the first quarter of 2023 with year-to-date (YTD) returns of 12.33% and -11.98%, respectively compared to -1.67% and 1.07%, at the end of March 2022. The GSE-CI performed better than the GSE-FSI due to major price recoveries in the following listed stocks – TOTAL, BOPP, MTNGH, UNIL, and TBL.
During the quarter, there were 5 gainers. TOTAL was the top gainer with a quarterly return of 59.75%, closing the quarter at GH₵6.39. The rally was mainly due to investor confidence in the firm’s 2022 financial performance as the firm’s profit increased. The second gainer for the quarter was BOPP which had a quarterly return of 52.55%. MTNGH was the third largest gainer ending the quarter at GH₵1.25, which represented a 42.05% quarterly gain. The other gainers were UNIL and TBL who gained 3.09% and 2.50% respectively. On the other hand, FML led the pack of 10 losers, ending the quarter at GH₵1.29, representing a quarterly loss of 57.00% followed by SOGEGH ending the quarter at GH₵0.62, which represented a 38.00% quarterly loss. The other losers were GGBL, CAL, GCB, EGH, SCB, EGL, GOIL, and ACCESS which lost 26.83%, 23.08%, 20.05%, 18.67%, 15.18%, 6.25%, 4.65%, and 0.25% respectively. Prices of 15 stocks remained flat.
The performance of the gainers and losers during the first quarter of 2023 on the GSE is detailed in the tables below.
| Share Code | Year High (GH₵) | Year Low (GH₵) | 30th Dec 2022 (GH₵) | 31st Mar 2023 (GH₵) | Quarter/YTD Gain |
| TOTAL | 6.39 | 4.00 | 4.00 | 6.39 | 59.75% |
| BOPP | 11.67 | 7.65 | 7.65 | 11.67 | 52.55% |
| MTNGH | 1.30 | 0.82 | 0.88 | 1.25 | 42.05% |
| UNIL | 4.00 | 2.06 | 3.88 | 4.00 | 3.09% |
| TBL | 0.82 | 0.80 | 0.80 | 0.82 | 2.50% |
| Share | Year HHigh (GH₵) | Year Low (GH₵) | 31st Dec 2022 (GH₵) | 31st Mar 2023 (GH₵) | Quarter/YTD Loss |
| FML | 3.00 | 1.29 | 3.00 | 1.29 | 57.00% |
| SOGEGH | 1.00 | 0.62 | 1.00 | 0.62 | 38.00% |
| GGBL | 2.05 | 1.37 | 2.05 | 1.50 | 26.83% |
| CAL | 0.65 | 0.50 | 0.65 | 0.50 | 23.08% |
| GCB | 3.94 | 3.15 | 3.94 | 3.15 | 20.05% |
| EGH | 6.64 | 5.40 | 6.64 | 5.40 | 18.67% |
| SCB | 20.16 | 17.10 | 20.16 | 17.10 | 15.18% |
| EGL | 3.20 | 3.00 | 3.20 | 3.00 | 6.25% |
| GOIL | 1.72 | 1.64 | 1.72 | 1.64 | 4.65% |
| ACCESS | 4.01 | 4.00 | 4.01 | 4.00 | 0.25% |
Current Economic Environment and Investment Implications
Ghana’s 2022 GDP growth rate is estimated to fall to 3.7% from 4.8% recorded in the third quarter of 2022. Other economic factors such as high inflation and persistent high public debt also pose serious implications for the economy. According to data released by the Bank of Ghana, the country’s total public debt shot up to GHS 575.7 billion in November 2022 bringing the debt-to-GDP ratio to 93.5% from 75.9% in September 2022. Credible reforms of government expenditure are needed to reverse the unfavorable debt dynamics and reduce domestic refinancing risks.
The current stability in domestic bond prices can be attributed to the successful completion of the DDEP. However, the country’s macroeconomic environment is still unstable due to the introduction of new taxes, the increase in rates of existing taxes, and the consistent hikes in the monetary policy rate. The increase in taxes is part of the government’s efforts to generate more revenue and secure the IMF bailout, as the implementation of these revenue tax bills forms a crucial part of the agreed Prior Actions in the IMF staff-level agreement.
The depreciation of the cedi is likely to slow down during the next quarter due to the decreased demand for foreign exchange as a result of the decrease in the speculative buying of the U.S. dollar and the progress made in negotiations with bilateral creditors.
Interest rates are expected to inch marginally upward to make GoG securities 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 and GSE Financial Stock Index are likely to decline due to the:
- Imposition of the Growth and Sustainability Levy Bill – The levy imposed as the following:
- Category A – 5% levy on the profit before tax. Category A companies include financial institutions, telecommunication companies, breweries and inspection and valuation companies, bulk oil distributors, oil marketing companies, and companies providing mining support and upstream petroleum services.
- Category B – 1% levy on gross production. Category B companies are mining and upstream oil and gas companies.
- Category C – 2.5% levy on the profit before tax. Category C companies are all other entities not falling within category A and B.
This will reduce the overall profitability of companies.
- Government’s domestic debt exchange programme – This will have a negative impact on interest income and profits of the listed banks, as their assets are mostly Government of Ghana securities. Banks are also predicted to face capital impairment in 2023 because of capital losses on their government bond holdings resulting from the DDEP.
