Response To Energy Bond To Determine Investor Confidence – Economist

Economist, Dr. Lord Mensah has suggested that the response to government’s 15 year energy sector bond will determine the investor confidence in the Ghanaian economy.

In his view, the interest to be charged by the investors would demonstrate the assurance that their investments will yield positive results.

Government is currently seeking a transaction advisor for its energy bond to pay the 10 billion cedis debt in the energy sector.

The Minority has questioned the seeming delay in issuing the bond citing lack of investor confidence.

But Dr. Lord Mensah tells Citi Business News the commitment of the investors will reflect in the success or otherwise of the issue.

“Presumably, the litmus test for the investor confidence wasn’t that clear in the earlier bond. But going forward, if the new bond will be private placement like the earlier one, then the commitment from the individuals who are going to bid as far as that bond is concerned, then it will determine how much confidence they have in the economy,” he stated.

The Vice President, Dr. Mahamudu Bawumia earlier this year told Citi Business News that the 15 year energy bond was crucial to develop the State Owned Enterprises in the energy sector.

The debts which amounts to 2.5 million dollars is said to have affected the operations of the institutions including banks, VRA and the Bulk Distribution Companies (BDCs).

The Minority has raised concerns over the issuance of the 2.25 billion dollar bond.

Among their issues is that the government carried out the deal under secrecy.

As a result they have disputed claims by government that the renewed investor confidence was greatly reflected in the subscription.

Dr. Lord Mensah further explained to Citi Business News the concentration of the issuance to some private investors could limit the investors’ confidence in buying the bonds.

“Because the government did not spread the issue across, it cannot say investors were confident in buying the bond…If the investors were confident and yet the government concentrated within one entity then more or less it is saying that effectively how competitive was the interest rate? Because if the interest rate was very high, the issuer of the bond that is the government of Ghana will be able to beat down the interest rate,”

Commenting on the likely response from investors to the energy sector bonds, the Economist also stressed that the decision to use the proceeds from the Energy Sector Levy Act to collateral for the bond should bring some confidence among investors.

“This is a bond that is earmarked for a specific sector not like the earlier bond which is more or less a general debt relief bond…it is going purposely to rescue a particular sector,”

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