West Africa in Focus /

Ghana is determined to navigate its debt crisis without the IMF

  • Ghana is determined to navigate its debt crisis without the IMF’s help, but the measures taken might not be sufficient

  • Nigeria is the world's best-performing equity market this year, but remain a no-go for international investors

  • Nigeria’s crude oil production drops again, further highlighting the impact of IOC exits

Ghana is determined to navigate its debt crisis without the IMF
Janet Ogabi
Janet Ogabi

Senior Research Analyst

Tellimer Research
19 May 2022
Published byTellimer Research

Nigeria is the best-performing equity market in the world so far this year. We know that this raises many questions –especially as the Nigerian capital market remains a no-go area for foreign investors – so we dissect the facts behind the figures. Elsewhere, Ghana remains adamant it does not need an IMF loan as it seeks to escape its precarious debt situation.

Rising inflation is widening the negative real interest rate in Ghana and Nigeria. And we bring you the takeaways from our IMF/ World Bank spring meetings on Nigeria, Cameroon, and Cote d’Ivoire.  Lastly, Nigeria’s SEC attempts to regulate digital currencies, but the overall policy direction on crypto remains confusing.

Nigeria's equity market defies global fundamentals

While global markets have slumped due to bearish sentiment regarding rising inflation, the pace of US Fed rate hikes and concerns about global economic growth, Nigeria's stock market has been on quite a roll. The equity market's primary index, the NGXASI, has gained c25% ytd in USD terms, making it the best performing equity market globally. Three major factors have supported the rally this year:

  1. Local players have dominated equity markets. No foreign portfolio investors (FPIs), no contagion

  2. Low fixed income yields driving investors towards stocks

  3. FPI exits through dual-listed stocks

Nigeria equities bucks global trend and tops global markets in USD returns

That said, it is worth noting that while the market's multiples may appear cheap compared to history (P/E at 10.8x vs 5yr: 11.3x), we believe the valuation may not be justified considering weak macro fundamentals. As Hasnain Malik puts it in his most recent equity monthly report, Nigeria equities remain off-limits to foreign investors due to the poor, foreign-investor-unfriendly policy environment.

Ghana is determined to weather the storm without the IMF

Ghana's finance minister announced that the federal government is maintaining its stance and is unwilling to take on an IMF loan to manage its debt. To address the debt challenge the country has found itself in, the central bank and fiscal authorities have adopted various measures such as introducing an E-Levy, increasing the interest rate, and reducing salaries for government officials. 

Debt service schedule on Ghana's US$ bonds (US$ mn)

Will the steps taken by the government be enough to avert a debt crisis, or will Ghana eventually go back to the IMF? Our updated debt sustainability index shows that Ghana is still one of the most vulnerable emerging markets at risk of debt distress. It will need to do more to dig itself out of its current predicament.

Takeaways from our IMF spring meetings: Cote d'Ivoire, Cameroon and Nigeria

We took part in productive discussions at the IMF and World Bank's recent Spring Meetings. The three global themes we observed from the meetings are lower global growth and higher inflation, tighter global financial conditions, and rising risk of debt distress.

The situation across the West African countries we examined is as follows.

Nigeria's oil production falls to 1.2mbpd in April

Nigeria's crude oil production continues to decline, with the latest OPEC monthly report putting April production at 1.22 mbpd (vs 1.29 mbpd in December 2021), according to direct communications, and 1.32mbpd, according to secondary sources. The EIA puts Nigeria's April output at 1.20mbpd, while the Bloomberg survey estimates 1.42mbpd. There are many sources and varying reports, but what is clear is that Nigeria's oil production numbers are worsening. This is due to declining investment in the sector and IOC exits.

Africa's biggest oil producer continues to miss out on the benefits of high oil prices, with production much lower than OPEC's stipulated quota of 1.735 mbpd. This translates to lost oil revenues which we estimate at US$2.2bn in four months (Jan-Apr, based on US$100/bbl), which would have been a much-needed boost to FX reserves and the persisting FX issues.

Nigeria's crude oil production below OPEC quota

Nigeria's SEC issues guidelines on digital currency

Nigeria's Security and Exchange Commission released guidelines on activities pertaining to digital currencies. This follows its promise to provide more clarity around the use and ownership of digital assets.

Despite the guidelines, the regulation of digital assets remains confusing. Some clauses in the guidelines raise questions about their effectiveness. Also, recall that the Central Bank of Nigeria (CBN) prohibited financial institutions under its purview from dealing in cryptocurrencies and facilitating payments for crypto exchanges and instructed these institutions to close the accounts of individuals dealing in cryptocurrencies.

A charity bike ride from London to Lagos highlights the extent of border closures across West Africa

A Nigerian man, Kunle Adeyanju, commenced a 12,000km charity motorbike ride from London to Lagos on 19 April. The endeavour has captured people's attention and his trip has been widely followed via his updates on Twitter and Youtube.

Initially scheduled to last 25 days, the journey has been extended by various challenges including bad roads, security difficulties and border closures.

The border closures stand out for us, and serve as a stark reminder of the restrictive border policies across the region in the past couple of years. We have previously argued that West Africa has plenty to gain from improved intra-regional trade, but border closures continue to hamper this goal. Although the security challenges in the Sahel region are partly responsible, we also cannot ignore the misplaced protectionist stance from many West African countries.

West Africa's intraregional trade remains low

Inflation in Nigeria and Ghana sends real interest rates even further into negative

Nigeria and Ghana reported record-high levels of inflation for April. Nigeria's inflation is now at a 9-month high of 16.8% (from 15.9% in March) due to pressure from energy and food prices. Ghana's inflation also printed at 23.6% (from 19.4% in March), making it the highest rate since January 2004. Ghana's price spike was due to an increase in food prices. 

As a result, the real interest rate is negative in both countries, with wider spreads in Nigeria. The real return in Nigeria is a lowly -12%, as average 1-yr treasury bill yields have hovered at low levels since the start of the year (the 1-yr yield is at 4.95% vs 4.9% at FY 2021). In Ghana, the real interest has turned negative and is now at -2%, although yields on 1-yr t-bills at auction have increased to 21.5% from 16.6% at the start of the year.

Nigeria shows wider negative real interest compared to Ghana

Upcoming events

Nigeria and Ghana interest rate decisions (23 May)

As we highlighted above, the rising inflation in Ghana and Nigeria is causing negative real interest rate to widen. Ideally, an interest rate hike would be expected for both countries, particuarly Ghana, which is making attempts to prevent further currency devaluation. For Nigeria, the direction is unclear, especially given that the country’s interest rate transmission mechanism is broken and the CBN prefers heterodox policies.  

Cote d’Ivoire and Senegal inflation (24 May)

The IMF expects inflation to increase over the course of the year, given the global food and energy supply situation. The Fund projects Senegal’s inflation to average 3% in 2022 (vs 2.2% in 2021) and Cote d’Ivoire to average 5.5% (vs 4.2%). As we have noted, the Russia-Ukraine war has enormous implications for Africa inflation.

Africa CEO Forum 2022 (13 -14 June)

The annual summit of the AFRICA CEO FORUM, in partnership with the International Finance Corporation (member of the World Bank Group), will be held on June 13 and 14, 2022, in Abidjan, Côte d’Ivoire.

Our recent West Africa reports

  • Following the release of the IMF’s latest WEO projections, we updated our sovereign debt sustainability index to assess debt risks across 46 emerging and frontier markets. The most vulnerable countries include Ghana, Egypt and Kenya.  

  • To quantify which emerging and frontier markets may be most vulnerable to a continued rise in global risk aversion, we updated our External Liquidity Index to quantify the risk of an external debt/balance of payments crisis across 43 emerging and frontier markets.

  • Based on our discussions over the course of the IMF/WB Spring Meetings, we present our key takeaways on Nigeria, Cameroon and Cote d’Ivoire.


Nigeria’s equities market takes a breather after five consecutive weeks of gains. The NGX ASI declined 0.2% wow, bringing the YTD return to 23%. The slightly negative sentiment also reflects in the market breadth with 46 gainers and 51 losers. Major gainers include consumer goods like BUA Foods, PZ and Unilever as well as palm oil producers such as Presco and Okomu. Top losers include banking stocks Stanbic and FBNH.

As highlighted previously, Nigeria’s equities market is the best performing in the world this year. The major drivers include: minimal contagion exposure, foreign investors' exits through dual-listed stocks and the low domestic fixed-income yields.  Going forward, we expect some profit-taking activities to result in a slight decline this coming week.

Tellimer's West Africa Equities Coverage

Market indicators

Nigeria's yield curve (%)

Ghana's yield curve (%)