… to revive bond market
By Juliet ETEFE ([email protected])
The rehabilitation of West Africa’s bond markets hinges on establishing a long-term yield curve, according to Bryan Pascoe, Chief Executive-International Capital Market Association (ICMA).
Speaking at the inaugural West Africa Bond Capital Markets Conference organised with Ghana Stock Exchange (GSE), Mr. Pascoe called for stronger government leadership in laying the structural foundations for a deeper and more resilient fixed income market across the region.
“For markets to develop and mature, there has to be a framework of predictability, depth and trust. Government should look to establish a longer-term yield curve,” he stated.
The yield curve, a fundamental benchmark for determining borrowing costs, is currently skewed toward short-term instruments in many West African economies – notably Ghana and Nigeria.
This limitation, Mr. Pascoe said, has curtailed broader participation in the market and left corporate issuers without the pricing signals necessary to plan long-term capital raises.
“Right now, the issuance is very focused on short-term activities. That hampers the market’s ability to serve its broader economic purpose,” he explained.
Since being shut out of international markets and following the domestic primary bond market’s crash – after the Domestic Debt Exchange Programme (DDEP) between 2021 and 2023 – the Treasury has had to rely almost entirely on short-term instruments.
This pushed the Treasury bill rates high. For instance, at the beginning of October 2024, the 91-day T-bill stood at 25.20 percent – its highest level since October 2023 – while the 182-day and 364-day bills climbed to 26.85 percent and 28.35 percent respectively.
Despite the Treasury needing to borrow around GH¢200billion from the shorter end of the market, it has however intensified attempts at rate correction.
In the first week of March 2025, the market reached an all-time high of GH¢20.49billion in total bids, marking a 140.5 percent oversubscription rate. However, government accepted only GH¢9.634billion in bids.
By the second week in April, the 91-, 182- and 364-day tenors had tumbled 15.65 percent, 16.5 percent and 18.84 percent respectively.
While these have raised concerns about real returns and a possible dent to the cedi on account of capital flight, Mr. Pascoe noted that signs of macroeconomic normaliaation in countries like Ghana – including a downward trend in interest rates and improving fiscal outlook – presents an opportunity for governments to take a lead in extending the yield curve and establishing benchmark issuances.
These, in turn, could serve as reference points for corporate and other non-sovereign issuers.
“Hopefully, government will take the lead in establishing more of a yield curve for issuance. Other borrowers can then use it as a benchmark for pricing on bond issues that they may expect to do as well,” he said.
The ICMA chief added that domestic participation needs to be strengthened and responsible international capital could play a complementary role.
“I think attracting broader investors is a very important feature of the market,” he noted.
In addition to government-led yield curve development, Mr. Pascoe recommended a series of interlocking reforms to boost market functionality. Chief among these was the development of a functional repurchase agreement (repo) market. This would allow banks and other financial institutions to borrow against bond holdings, thereby improving liquidity and providing essential short-term financing tools.
“There are other elements as well such, as encouraging market makers to provide liquidity in bond markets and also some other products – such as repo market development – which can be used for funding using the bonds as collateral to help banks and other market practitioners finance themselves,” he noted.
A well-functioning repo market, Mr. Pascoe argued, is a defining feature of advanced bond markets and would play a pivotal role in promoting liquidity, enhancing price discovery and supporting secondary market trading.
The call comes as regional regulators and exchanges are working on the West Africa Capital Markets Integration Project, which aims to allow cross-border trading of listed securities across Ghana, Nigeria and the BRVM – the regional bourse covering eight Francophone West African countries.
Abena Amoah, Managing Director-GSE, underscored the urgency of developing strong domestic bond markets in West Africa; particularly as access to international capital markets becomes increasingly constrained.
She argued that robust local capital markets would empower citizens to invest in critical infrastructure and productive ventures, helping to bridge the region’s infrastructure financing gap.
“We know West African citizens deserve opportunities to be educated and invest in ventures that can be profitable,” she said.
Ms. Amoah highlighted the importance of stable macroeconomic conditions in making capital markets attractive to both issuers and investors.
Beyond monetary policy, GSE’s boss emphasised the significance of market infrastructure and education in building a resilient financial ecosystem. She cited GSE’s introduction of green bond guidelines, the launch of a commercial paper market and partnerships with stockbrokers and banks to improve retail investor access via digital platforms.
“We are working with the market to develop apps and solutions that make it easier for an investor to come onto the market,” she noted. She also mentioned ongoing engagement with pension funds and capital-hungry companies to facilitate efficient capital allocation.
Through the West Africa Capital Markets Integration Project, she added, GSE is collaborating with Nigeria and BRVM to enable cross-border trading – enhancing liquidity and providing investors access to a broader pool of securities.
Director General, Nigerian Securities and Exchange Commission (SEC Nigeria) Dr. Emomotimi Agama, said while West Africa as a region “has not done very well” he is convinced that this shortfall presents “a lot of opportunities ahead of us”.
He reiterated the critical importance of mobilising long-term capital through the bond market to support national development.
“The need for long-term capital in Africa cannot be over-emphasised. For you to achieve the objectives of development, you must be able to raise long-term capital that allows you to fund long-term projects,” he explained.
