Economy
Fitch Upgrades Ghana’s Outlook to Stable
Ghana national flag
By Dipo Olowookere
The Outlook on Ghana’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) has been upgraded by Fitch Ratings to Stable from Negative. Also, the West African nation’s IDRs have been affirmed at ‘B’.
A statement issued by the rating agency on Friday stated further that it has equally affirmed the issue ratings on Ghana’s senior unsecured foreign and local currency bonds at ‘B’, as well as the ‘BB-‘ rating on Ghana’s $1 billion partially guaranteed note.
Ghana’s Country Ceiling and Short-Term Foreign and Local Currency IDRs have been affirmed at ‘B’, Fitch said.
The agency said Ghana continues to make progress in stabilising its economy after its recent crisis period, with an expected revival in GDP growth, declining inflation, a more stable currency and increasing foreign exchange reserves.
Furthermore Fitch judges that the new government will make progress in reducing the budget deficit after the election-related slippage in 2016, albeit with continued downside risks.
Fitch expects growth to improve to 6 percent in 2017 from an estimated 3.6 percent in 2016, when it was hampered by lower than expected oil production and power cuts.
CPI inflation fell to 12.9 percent year on year in March, from a peak of 19 percent in March 2016. The cedi has recovered to 4.2/$, after depreciating to 4.7/$ in early March. The improvement in the macroeconomic environment has allowed the Bank of Ghana to cut its policy interest rate to 23.5 percent from a peak of 26 percent in 2016.
Further, rising oil production and the benefits from macroeconomic stability will support Ghana’s medium-term growth potential above 6 percent, a key rating strength.
Ghana experienced a blow-out in the 2016 budget deficit, which widened to an estimated 8.9 percent of GDP (on a cash basis) in the run-up to December general elections, compared with a government and IMF target of 5.3 percent, and an outturn of 6.3 percent in 2015.
The cash deficit includes up to USD1.3 billion (3% of GDP) in off-budget and unapproved spending. On a commitment basis, accounting for an additional $650 million in unpaid commitments, Ghana’s deficit widened to as much as 10.5 percent of GDP.
Fitch notes that some of the unapproved expenditure is presently being audited and a significant chunk may be written down, which would lower the deficit.
The election resulted in a win for the New Patriotic Party, Ghana’s centre-right party, which had been in opposition since 2009. In March, the new government announced its 2017 budget, which calls for fiscal consolidation, and measures to strengthen public financial management.
Fitch forecasts the 2017 budget deficit to narrow to 7.5 percent of GDP on a cash basis, and further to 5.5 percent in 2018.
The government’s 2017 deficit forecast of 6.5 percent of GDP is based on an expected increase in tax revenues and a cut to capital expenditures.
Fitch believes that the expected increase in tax revenues will be difficult to realise, as the budget contains significant tax cuts aimed at boosting the business climate. Fitch notes that Ghana has historically underperformed its budgeted revenue projections.
On the expenditure side, interest costs will continue to exert upward pressure. Ghana’s interest costs are 32 percent of its general government revenues, a level well above the ‘B’ median of 9 percent.
Also, a lack of transparency and accountability within the line ministries has persistently led to substantial off-budget spending and the accumulation of arrears.
Successful implementation of the measures outlined in the Public Financial Management Act, 2016 would help control expenditure and keep spending focused on the policy priorities outlined in the budget.
Gross general government debt has stabilised, experiencing a slight increase to 73 percent of GDP at end-2016, from 72 percent at end-2015.
Fitch expects the debt/GDP ratio to decline to around 71 percent by end-2017 due to strengthening of the exchange rate (62% of debt is foreign currency denominated), lower budget deficit and robust nominal GDP growth.
However, Ghana’s debt level will remain higher than peers both as a percentage of GDP (the ‘B’ median is 56% of GDP) and as a percentage of revenue. Ghana’s general government debt/revenue is 366%, compared with the ‘B’ median of 225 percent.
Fitch said Ghana’s $915 million Extended Credit Facility (ECF) with the IMF is a key support for the sovereign ratings.
The incoming government has signalled its commitment to complete the programme, but has engaged with the Fund in renegotiating some of the programme’s indicative targets and structural benchmarks.
IMF staff completed the fourth review of the ECF in March and it will go to the IMF Board for approval before the end of June, allowing for the dispersal of an additional $116 million. Fitch believes that the government remains committed to successfully completing the current programme, which is due to run until 2018.
Ghana’s ‘B’ IDRs reflect the following key rating drivers:
Ghana’s external finances are a rating weakness. Fitch forecasts the current account deficit to narrow slightly to 6.3 percent of GDP in 2017, from 6.7 percent in 2016, but remain above the ‘B’ median of 5.7 percent of GDP.
Increases in oil and gas exports will help Ghana’s export performance, but rising imports will keep the current account deficit from narrowing significantly. International reserves increased by $460 million in 2016, ending at $4.9 billion, about 2.8 months of current external payments.
Fitch says it expects that external debt payments due in 2017 will limit reserves accumulation and forecasts reserves to reach $5.2 billion at end-2017.
The ratings are supported by World Bank governance indictors and business environment indicators that are stronger than the ‘B’ median, underlined by the peaceful transition of power in December. However, the ratings are constrained by low GDP per capita, which at $1,509 is less than half the ‘B’ median, low human development indicators and dependence on commodity exports.
By Adedapo Adesanya
Market bellwethers, Central Securities Clearing System (CSCS) Plc and FrieslandCampina Wamco Nigeria Plc, lifted the NASD Over-the-Counter (OTC) Securities Exchange by 2.08 per cent on Monday, August 3.
CSCS Plc, the Nigerian securities depository company, gained N10.00 to close at N112.00 per share compared with the previous session’s N102.00 per share, and FrieslandCampina Wamco Nigeria Plc advanced by N4.71 to quote at N152.64 per unit versus last Friday’s N147.93 per unit.
As a result, the NASD Security Index (NSI) added 92.14 points to finish at 4,523.85 points compared with the preceding session’s 4,431.71 points, and the market capitalisation appreciated by N55.31 billion to N2.715 trillion from N2.659 trillion.
Business Post reports that the price of MRS Oil Plc crashed during the trading day by N12.00 to N120.00 per share from N132.00 per share, and UBN Property Plc dipped by 3 Kobo to N1.90 per unit from N1.93 per unit.
Trading data showed that the volume of securities exchanged rose by 113.1 per cent to 1.5 million units from 690,990 units, and the number of deals climbed by 19.2 per cent to 31 deals from 26 deals, while the value of securities slid by 13.1 per cent to N65.2 million from N75.0 million.
Great Nigeria Insurance (GNI) Plc remained the most traded stock by value on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units sold for N6.5 billion, and CSCS Plc with 76.8 million units traded for N5.5 billion.
GNI Plc also closed the session as the most traded stock by volume on a year-to-date basis, with 3.4 billion units worth N8.4 billion, followed by Infracredit Plc with 2.3 billion units exchanged for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.
By Adedapo Adesanya
The Nigeria Revenue Service (NRS) has introduced a 1.5 per cent stamp duty on eligible virtual asset transactions, with the tax deducted directly from the cryptocurrency purchased before it is credited to the buyer’s wallet.
According to the new guidelines issued on Monday, anyone buying Bitcoin (BTC), USDT or other cryptocurrencies in Nigeria will receive fewer digital assets due to the deduction.
This requires registered crypto exchanges and other Virtual Asset Service Providers (VASPs) to withhold the levy in the digital asset being traded and remit it to the government, marking Nigeria’s most comprehensive move yet to bring cryptocurrency transactions into the country’s tax net.
Unlike traditional taxes deducted from a customer’s bank account, the 1.5 per cent charge will be taken from the cryptocurrency itself, meaning buyers will receive less Bitcoin, USDT or other tokens than they paid for.
The tax body stated that “income tax deducted at source and stamp duty shall be remitted to the service in the originating token of the transaction.”
Besides the new stamp duty, the guidelines also clarify how income tax, Value Added Tax (VAT) and other tax obligations will apply to virtual asset activities such as trading, staking, mining and other crypto-related transactions.
To illustrate the new rule, the tax authority said a buyer who pays N1 million for one Bitcoin will receive only 0.985 BTC after 0.015 BTC is deducted as stamp duty and remitted to the government. When that Bitcoin is later sold, the next buyer will also have 1.5 per cent deducted from the cryptocurrency credited to their wallet.
The NRS said the guidelines are intended to provide clarity for taxpayers, crypto exchanges, peer-to-peer (P2P) marketplace operators, financial institutions, tax consultants and all participants in Nigeria’s virtual asset ecosystem.
According to the guidelines, the 1.5 per cent duty applies to eligible virtual asset transactions facilitated through registered exchanges and other recognised intermediaries. Where a cryptocurrency is used to complete a transaction that already attracts stamp duty under the law, the applicable duty on the underlying instrument will also be payable.
For crypto users, the implication is higher transaction costs, as eligible purchases will attract the 1.5 per cent stamp duty, while VAT on exchange service fees and income tax on taxable gains may also apply, depending on the nature of the transaction.
By Adedapo Adesanya
The Naira opened the week on a positive note, as it appreciated against the US Dollar by N3.39 or 0.25 per cent in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Monday, August 3, to N1,364.83/$1 from N1,368.22/$1 last Friday.
However, it suffered a marginal decline against the Pound Sterling in the official market during the session by 10 Kobo to close at N1,837.89/£1 compared with the preceding session’s N1,837.79/£1, and lost 6 Kobo on the Euro to sell at N1,573.93/€1, in contrast to the previous trading day’s N1,573.87/€1.
At the black market segment, the Nigerian currency traded flat against the Dollar yesterday at N1,405/$1, and at the GTBank forex counter, it was unchanged at N1,374/$1.
Interbank FX transactions increased sharply as market makers’ activities raised total Dollar volume exchanged to $137.048 million, more than 132 per cent above $58.990 million in turnover at the previous close. The surge in turnover was driven by increased deals at the NFEM window. The central bank reported that deal count at the interbank FX window rose to 138 from 67 on Friday.
As for the cryptocurrency market, major tokens advanced despite ongoing uncertainty around unresolved Coldcard wallet sweeps that have drained hundreds of Bitcoin (BTC), while traders are watching whether bitcoin can hold above $63,000 through the US session. BTC rose by 1.70 per cent to $63,765.88.
Bitcoin treasury firm Strategy disclosed Monday it sold 1,638 bitcoin for about $105 million between July 27 and Aug. 2, its third sale of 2026, per an SEC filing.
Also, an attacker has moved about 1,816 bitcoins, or roughly $114 million, from more than 5,200 addresses since July 30 in a fourth wave of sweeps targeting BTC in Coldcard-generated addresses.
Cardano (ADA) appreciated by 6.7 per cent to $0.1959, Binance Coin (BNB) gained 1.5 per cent to sell for $590.82, Solana (SOL) jumped by 1.3 per cent to $73.72, TRON (TRX) soared by 0.9 per cent to $0.3286, Dogecoin (DOGE) also grew by 0.9 per cent to $0.0703, Ripple (XRP) advanced by 0.5 per cent to $1.07, and Ethereum (ETH) rose by 0.4 per cent to $1,863.33, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 apiece.
