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Ghana is asking bondholders including Nigerian banks to take haircuts of as much as 40% to meet its debt-reduction targets under a $3 billion bailout program from the International Monetary Fund.
Tier-one Nigerian bank GTCO booked net impairment charge on other financial assets of N81.3 billion in June 2023, largely on the back of the default by the Ghanaian government on its Eurobonds, part of which is contingent.
The African nation is in talks with two commercial creditor groups, one regional and one international, and has received restructuring proposals from both, Finance Minister Ken Ofori-Atta said at a livestreamed investor presentation Monday.
“In our indicative scenario, the restructuring terms for bondholders involve a nominal haircut between 30% and 40%, looking at coupons of no more than 5% and final maturities of no more than maybe 20 years,” Ofori-Atta said. “We expect to accelerate a constructive dialog in the coming weeks,” aiming for a deal by year-end.
Ghana is also trying to firm up an agreement in principle with bilateral lenders ahead of an IMF board meeting next month.
That agreement would also help lay the groundwork for any accord with commercial creditors due to the comparative treatment principle that guides talks under the Group of 20 Common Framework for Debt Treatment.
“We look at our Eurobond exposure in Ghana we have already taken 30% haircut. The Ghanaian government has not yet settled the Eurobonds. It has done local bonds and local USD, however,” Group Chief Executive Officer of GTCO Plc, Segun Agbaje, said in a conference call last month.
Access Bank took an impairment of N103.10 billion in full year 2022 on recognition of the economic loss impact of Ghana sovereign debt crisis (Domestic debt and Eurobonds).
Other Nigerian lenders such as UBA, First Bank and Fidelity have exposure to Ghana.
Ghana with a $77 billion economy is restructuring much of its $50 billion of public debt under the framework, which expands the Paris Club of sovereign creditors to include China and other nations. Bilateral and commercial debt holders are encouraged to agree to comparable terms on a net-present value basis under this arrangement.
Ghana needs to reduce its debt to 55% of gross domestic product by 2028 from 109% before it started restructuring its liabilities to meet its IMF target.
A domestic debt restructuring, which has already been carried out, and a set of fiscal adjustments are set to bring the debt down to 72% of GDP by that year. The accord with external creditors is expected to provide the remaining relief.
Eurobonds account for $13 billion of the country’s public debt load.
“We expect this treatment to be consistent” with the goal of making the country’s debt sustainable, Ofori-Atta said.