The Ghanaian Cabinet has approved a Eurobond auction for the country, the transaction size of up to $ 1 billion. The decision is based on anticipated market conditions and financing needs.

The bond auction timetable has been set for July this year.

Financial institutions Citi Group and Barclays have been selected as the Lead Manages of the auction with the co-managers been local finance houses EDC Stock Brokers and Strategic African Securities.

In a statement issued late last night by the country’s Ministry of Finance, the ministry said “government as part of debt management policy in the 2013 Budget Statement and Economic Policy indicated its intention to extend the maturity profile of the public debt by diversifying her sources of funding for major infrastructure projects and for other specified purposes including tapping the global bond market”.

Last week the country’s Vice-president Kwesi Amissah-Arthur told the World Economic Forum for Africa held in South Africa that Ghana will be floating its second sovereign bond to raise money for infrastructure projects and also service maturing debts.

It should be noted that the transaction is subject to prior approval by Ghana’s Parliament and exact amount is also subject to variations that might be dictated by market conditions and parliamentary approval. The statement noted that the  indicative use of proceeds as approved by Cabinet includes:

i. Payment of counterpart funds for capital projects
ii. Capital expenditures approved in the 2013 Budget (with priority given to self-financing projects)
iii. Refinancing of public debt to reduce the cost of borrowing

This will be the second time Ghana will issue a sovereign bond. The first was in 2007 when it raised $750 million for infrastructure projects. The trend has caught on in Africa with Zambia, Ivory Coast, Nigeria and Rwanda all raising money on the international markets through bond flotation.