MTN to stagger share proceeds repatriation

The Bank of Ghana (BoG) has begun talks with officials of MTN Ghana, a mobile network company, to stagger the repatriation of GH¢3.48 billion that will be accrued to the company from its initial public offer (IPO).

The talks will also border on the valuation of MTN shares for the Ghana Revenue Authority (GRA) to apply the necessary taxes on gains (capital gains tax) that will be made by the telecommunications company.

MTN Ghana plans to raise GH¢3.48 billion (about $750 million) through the sale of 35 per cent of its shares to Ghanaians in an IPO.

Market analysts have raised concerns about the fact that the repatriation of the proceeds will have an effect on the cedi and trigger an exchange rate fluctuation.

But the Governor of the BoG, Dr Ernest Addison, in an interview with the Daily Graphic, said the central bank was engaging the management of MTN to ensure that any foreign outflows from the IPO were done in phases and in an orderly manner.

“They have given us that assurance and we are monitoring the situation. These assurances from MTN to treasury managers of banks about no immediate plans to externalise these payments should mute that aspect of market sentiments,” he added.

Cedi depreciation

The move by the central bank is to curb depreciation of the cedi, particularly against the which may be occasioned should the telecom company transfer all the proceeds from its share sales immediately.

Since January this year, the cedi has depreciated by four per cent against the dollar.

The depreciation of the cedi is partly due to a broader weakness in emerging markets and a rise in the American currency.

But Dr Addison said while the global and domestic developments did not pose a threat to inflation in Ghana in the near term, the BoG was monitoring the situation to take appropriate policy actions.

The BoG expects the local currency to recover as the bank sells more dollars to local banks.

A market note published by Barclays Bank Ghana last Thursday said the central bank sold around $30 million on June 6, 2018.

Economic turnaround

The turnaround in the economic fundamentals in 2017 continued into 2018, supporting a very strong build-up in the international reserves position of about $8.1 billion, including proceeds from the recent sovereign bond.

The strong external reserves position has supported developments in the foreign exchange market, where the cedi has performed very well against all the major international currencies.

According to the governor, the BoG had observed some movements in the exchange rate, in particular the cedi against the dollar, which, based on its assessment, mainly reflected a spillover from external developments.

Emerging markets

Global financing conditions for emerging markets (EMs) are changing, as oil prices rise, the US dollar strengthens and US interest rates rise.

These developments, which initially impacted EMs, are beginning to spill over to frontier market (FM) economies.

“In the case of Ghana, we strongly believe that staying on track with government’s fiscal consolidation plan, the strong trade surplus, narrowing current account balances, significant build-up in international reserves now at 4.4 months of import cover and a declining inflation rate should moderate this impact,” Dr Addison said.