KEY POINTS
- Ghana halts pension fund offshore investments to stabilize the cedi.
- Private fund managers say restrictions limit diversification and value creation.
- Debate grows as inflation and cedi depreciation affect local investments.
Ghana has restricted private pension fund managers from investing in offshore assets, citing fears of further weakening the cedi. The National Pensions Regulatory Authority (NPRA) halted fund managers’ attempts to diversify investments abroad despite laws allowing up to 5% of assets for offshore use.
According to a report by Reuters, the pension industry has seen significant growth since 2010 reforms introduced a tiered contribution system.
By June 2024, assets under management reached 78.2 billion cedis ($4.93 billion), with over 73 percent handled by private firms. These contributions have primarily been invested in Ghanaian assets like government Eurobonds.
However, private managers have increasingly sought offshore opportunities following the restructuring of 31 billion cedis in local debt. Fund managers argue that diversification is necessary to protect pensions from inflation and currency devaluation.
Balancing economic stability and investment growth
The government’s priority is protecting domestic liquidity as the cedi continues to depreciate, falling 25 percent against the U.S. dollar this year.
A finance ministry source emphasized the need to balance economic stability with investment returns. “The ministry won’t say no, but protecting the economy comes first,” the source said.
Private pension managers have criticized the restrictions, pointing out that other African pension funds and local mutual funds invest offshore without similar limitations.
“Globally, pension funds chase value, but we’re forced to chase inflation,” said an executive from a top fund management firm.
The NPRA insists it is not opposed to offshore investments but requires government approval to ensure alignment with economic goals. Discussions are ongoing to clarify the rules and valuation criteria for these investments.
The debate underscores the tension between Ghana’s economic recovery efforts and fund managers’ push for higher returns through diversification. As stakeholders wait for a resolution, the pressure on the cedi highlights the challenge of balancing fiscal responsibility with market growth.
