Bond investment in Ghana: Making informed choices

On Friday, January 20, 2023, someone placed information, evidently intended to sway people from investing in government bonds, on a WhatsApp platform.

The content comprised the images of President Akufo-Addo, Senior Minister Yaw Osafo-Maafo, Chief-of-Defence Staff Abena Frema Osei-Opare and Finance Minister Ken Ofori-Atta.

The content estimated the age of each personality at the maturation of the proposed bonds.

Early on, I had come across an opposition political element discussing the bond from the same timeline perspective.

Apparently, incongruous political elements have received another manoeuvring angle in raw politicisation.

I decided to make myself informed.

So, I hit the global bond market and got enlightened.

If I could understand the concept, then anybody can self-educate to make the informed choice about investing in government bonds or do otherwise! Ghanaians should learn to decide autonomously.

Investment

This is not the first time citizens are receiving invitation to invest in the country or governing institution.

In the 90s, Ghana Commercial Bank(GCB) floated shares.

I was a student so lacked investing resources.

However, I remember that many who bought shares were disappointed at the dividends the bank paid.

Though too young to analyse issues, I still remember the complaints.

A bond does not give ownership like shares, but it yields interest, and buyers are repaid the invested capital upon maturation, subject to reinvestment.

Logically, there are risks emanating from market fluctuations, which impact negatively or positively on yields.

The underpinning of conversation should be type of bond, investment period, interest rate, other associated risks, and of course, the credibility of the issuer.

A long-term bond can place the issuer at a disadvantage due to inevitable interest fluctuations.

The bondholder’s interest can go up or down, depending on prevailing rates, but the buyer is required to pay, just as it must repay the face value of the bond upon maturation.

In that sense, the long-term offer being made by government might actually be in investors’ best interest.

Could it be that the pessimists desire to prevent citizens from commencing a firm path to financial independence?

Ordinary Ghanaians need to understand that the bond market has been gaining solid grounds since the Twentieth Century.

Currently, many governments across the globe are utilising bonds for capital.

PIMCO, an international bond manager, opines: “Governments, corporations and municipalities issue bonds when they need capital”.

If ours were a literate society, every citizen would probably be researching the international bond market for legitimate knowledge.

However, a high illiteracy rate, complemented by increasing illiteracy, paves the way for detractors.

Legitimate

A legitimate approach would be to investigate who has been investing in the bond market, its scope and worth.