Afriyie Oware, CEO of Axis Pension Trust, has said that deep structural reforms are needed to successfully implement the current investment guidelines and build a truly resilient pension investment framework.
To ensure this, he has proposed six core areas for immediate focus, including Capital Market Development.
Speaking at the 2025 pension strategy conference in Accra on Wednesday, May 14, he stated that equity allocation stands at a dismal 3%.
This reflects not just trustee preferences, but a lack of viable, investable and liquid stocks to absorb the burgeoning pension assets, he said.
He added that trustees, other capital market operators and the government must invest in listing stronger companies, improving governance practices of Ghanaian businesses, and deepening market liquidity. Without a vibrant stock exchange, long-term growth capital will remain elusive to the private sector.
Corporate Debt Market Reform:
Mr Oware further explained that Ghana’s underdeveloped corporate bond market – accounting for just 1.5% of total bond activity – signals deep structural weaknesses in the private sector, compounded by a high non-performing loan ratio of over 24%, [which reflects poor creditworthiness and weak debt culture]. Most Ghanaian businesses remain too small and fragmented to absorb significant capital, limiting their access to financial markets. Also, the decline of once-prominent SOEs like PBC left a sour taste in the mouths of pension funds and other investors.
To build investor confidence and fuel capital market growth, Ghana must promote mergers and acquisitions of its businesses to build scale, strengthen corporate governance, and foster a culture of transparency through credible issuer and instrument ratings.
Money Market Modernization:
In this area, he said that Ghanaian investors have traditionally favored high-yield, short-term fixed-income instruments. However, the absence of a structured market for money market securities has confined these investments to over-the-counter (OTC) transactions predominantly issued by banks. This lack of formalization limits transparency, liquidity, and broader investor participation.
The BoG and the Ghana Stock Exchange (GSE) should collaborate to foster the creation of an organized issuance market for negotiable fixed deposits. Additionally, the introduction of a formal commercial paper market under the GSE’s Commercial Paper Issuance and Admission Rules 2024 can be leveraged to diversify investment options and provide more efficient funding options for issuers. These initiatives are pivotal in fostering investor confidence and attracting greater pension fund investment into the private sector.
Revitalizing Local Government Finance:
Oware said that the dream of municipal bonds remains unfulfilled, hindered by the fragmentation of the cities into small municipalities, thereby limiting their financial autonomy and creditworthiness necessary for successful bond issuance. Ghana must undertake political reforms to consolidate municipalities, enhance governance, and establish a robust regulatory framework for local government development initiatives. These steps are essential to transforming local governments into effective agents of economic development and to attract investment through a viable municipal bond market.
Unlocking the Real Estate Opportunity:
Real estate holds immense promise but is constrained by chaotic land tenure system, poor urban planning, and fragmented land administration.
“We must revisit the examples of TDC, Dansoman, and Sakumono estates. Government should legislate for land use reform where the granting of land leases across the country vests in an agency of the state; empower structured real estate developments in our cities; and build modern cities, not just settlements. Such reforms are not merely about real estate—they are about national transformation,” he said.
He added “A modern Ghana requires modern cities, and that begins with bold, coordinated action in land use governance, as a pre-condition for a vibrant real estate investment market.”
Reimagining State Capitalism:
He noted that Pension funds have continued to place massive bets on a public sector that traditionally had underperformed.
Meanwhile, he said, the private sector struggles with limited access to credit, receiving only about 13% of GDP, significantly below the Sub-Saharan African average of 20%. This is in stark contrast with public debt levels of over 75% of GDP. As the most favored borrower, government can use its borrowing power to initiate commercially viable projects, in partnership with private sector [as operators] and pension funds [as financiers]. Public-private partnerships, like the successful Twifo Oil Palm Plantation developed with the European Union, exemplify how collaborative efforts can drive economic development. We either build quality assets locally to absorb the massive inflows or brace ourselves to export our capital.
Touching on the financial sector cleanup, Mr Oware said that the unintended consequence of the financial clean-up was a deep-rooted aversion to risk among Ghanaian investors.
As a result, he said, pension fund trustees flooded into GoG securities, ignoring the mounting risk of sovereign default. While the financial system was being sanitized, government finances were deteriorating. Despite updated guidelines in 2017 aimed at promoting diversification to private sector to spur real sector growth, [including reduction in GoG & LGSA securities limits to 75%, the introduction of alternative assets with 15% limit and increased allocations to 20% and 35% for equity and corporate debts,] portfolio composition moved in the opposite direction. The panic set off by the clean-up, compounded by interest rate haircuts and delayed payouts to depositors (including pension funds), drove the industry into a “flight to safety” mode, culminating in an overwhelming 84% exposure to GoG and LGSA instruments, yet again, ignoring what could go wrong.
He noted that the latest investment guidelines launched in 2021 introduced constituent funds and lifecycle investing models, while removing the mandatory 30% allocation to government bonds. It was a bold attempt to shift focus toward long-term growth assets. Yet, the limited supply of credible investment alternatives remained unresolved. The economy soon imploded, inflation soared, the cedi lost over half its value, the bond market collapsed, and pension funds bore the brunt of Ghana’s first sovereign default in recent history. Despite all of this, by 2023, 83% of pension assets remained invested in GoG securities. Trustees had still not pivoted for lack of investable alternatives. The lesson was not absorbed.
“Even the former President, H.E. President AkuffoAddo, had to sound the alarm during his 2023 May Day speech, urging pension fund portfolio diversification into the real economy. The warning could not have been clearer: it is not the role of government to create investment assets for the pension industry,” he said.
