The Public Interest and Accountability Committee (PIAC) wants the country to move from investing petroleum funds in only low-risk Instruments to a mixture of both high and low.
This, along with diversifying place of investment – mostly the USA market, PIAC’s Technical Manager Mark Agyeman argues, will offer maximum returns while ensuring safety for the funds.
Currently, the Stabilisation Fund is usually housed in short-term investments, while the Ghana Heritage Fund (GHF) is invested on long-term basis per the Petroleum Revenue Management Act (PRMA). However, the two are mostly invested in low-risk instruments like government and multinational corporation bonds, which PIAC believes do not offer the country best returns.
“What we at PIAC are saying is, why don’t we diversify these investment portfolios by investing a portion of the petroleum funds in low-risk and a portion in high-risk to maximise the returns on these investments?” he explained to the B&FT in Accra.
Mr. Agyeman also wants government to diversify where the funds are invested. “Secondly, in diversifying the qualifying instrument, we should also diversify the place of investment. Usually it is invested in the US market, and if something happens to the US markets it impacts on our investment returns. So, why don’t we diversify so that it can be invested across markets.”
Doing so, he added, will not only guarantee security of the funds but offer good returns on investment: “If something happens in the US markets and the Chinese market is gaining or the European market is gaining, if we have invested there we can take advantage of it instead of limiting investments to just one specific market. So, basically, this is what we are saying; diversify the risk and diversify your returns”.
Mr. Agyeman spoke on the sidelines of the launch for a report titled ‘Ghana’s management and use of petroleum revenue: An issue paper’, by PIAC – in which the Committee noted that the yield of 10-Year US Treasury bills had risen from 0.46 percent in 2014 to an all-time high of 2.69 percent in 2018, but dropped to 1.92 percent in 2019.
Consequently, yields on the GHF fluctuated – from 7.73 percent in 2014 to 1.79 percent in 2016, and rising to 6.4 percent in 2019, according to the Bank of Ghana.
“These fluctuations in the yields bring to bear some of the risks in relying on a narrowly-defined investment instrument. With additional petroleum production expected to come onstream, and the resultant potential for the Fund to receive more allocations, spreading the risks across diverse investment portfolios and jurisdictions would be a valuable strategy for tackling the political and financial risks which may be peculiar to US markets,” PIAC said.