Ghana: Waiting for FDI

Ghana’s foreign direct investment inflows have fluctuated over the past four years, dampened by concerns over macroeconomic stability and the national debt load. As the new administration moves ahead with reforms, however, investor confidence is expected to rise, and FDI inflows along with it.

Ghana’s rising status as an investment hub in West Africa, with a record of political stability and business-friendly rules regime all contribute to its attractiveness to foreign investors. Oil and gas, infrastructure, mining, agriculture and agro-processing – especially of cocoa – and information and communications technology are among the sectors commanding attention, along with financial services and tourism.

Larger economies with companies operating in Ghana include China, the US, Germany, Japan, Italy, and Ireland; the bigger names include Procter & Gamble, Volkswagen, Toyota, and Sinotruk. In the telecom sector, foreign operators include South Africa’s MTN, Vodafone, Huawei Technologies, and AirtelTigo.

Ghana’s oil industry, a relatively new sector, is also experiencing an inflow of foreign operators looking to boost pro- duction, including Tullow Oil, Kosmos Energy, and Italy’s ENI, while incom- ing mining operators include Newmont Ghana Gold Ltd, Gold Fields Ghana Ltd, and Anglogold Ashanti Ghana Ltd.

But while interest has been growing over time, the annual volume of FDI flowing into Ghana has oscillated because of macroeconomic instability, which led to a debt crisis in 2022. According to Macrotrends, a research platform for investors, in 2021, FDI inflows into Ghana rose by 35%, to $2.5 billion from the previous year. In 2023, however, inflows dropped to $1.3 billion, a 7.6% decline from 2022.

Stabilization Takes Hold

A new era may have begun in May 2023, however, when Ghana reached a loan support agreement with the International Monetary Fund. Last December, a presidential election was held, further strengthening stabilization.

“Over the coming five years, the capital and financial account is expected to gradually improve,” the IMF noted in a December 2024 report, “with FDI fore- cast to increase to 3% of GDP by 2028 following the completion of the debt restructuring and gradual reform imple- mentation.” Fund officials were in Accra last month to assess Ghana’s economic performance and structural adjustments under the stabilization plan.

The government is confident investment flows will grow.

“Commitment to continue to implement the ongoing IMF-supported pro- gram and reforms to forge macroeconomic stability and debt sustainability will restore investor confidence, resulting in further improvement in FDI flows,” Minister of Finance Cassiel Ato Forson said in his 2025 budget speech in March. In its Exemption Act of 2022, Ghana listed priority areas of investment that will enjoy investor tax incentives: manufacturing, minerals and mineral processing, mining investment by indigenous Ghanaians, oil and gas (value addition), real estate (property development and road infrastructure), pharmaceuticals, agro-processing, and tourism.

On the political front, Ghana’s peaceful election in December “means that democracy has come to stay,” says Marcel Okeke, former chief economist at Zenith Bank, Nigeria’s leading lender. Ghanaians elected a former president, John Daramani Mahama, over incumbent Nana Akufo- Addo. The transition from one administration to the next, one political party to another went off without any call for judicial intervention, suggesting that a period of stability may be ahead.

The loan agreement with the IMF has produced some positive effects. Ghana’s external reserves improved to $8.8 billion in 2024, up from around $6 billion the previous year, reflecting modest gains driven largely by increased borrowing from the IMF and a stronger trade surplus. Despite these positive signs, challenges lie ahead. While the uptick in reserves is a plus, Ghana has an external debt of $28.3 billion, including a segment of eurobonds on which payment has had to be rescheduled. More than half of external debt service of $8.7 billion falls due in 2027.

“These humps are cancerous and pose significant risk to the economy, but we shall fix it,” Forson declared. But Ghana also owes the IMF some $2.5 billion, which means nearly 30% of its reserves are tied to IMF debt; with just $8.8 billion in total reserves, the central bank could run out in about three and a half months.

“The reserves are too low to offer tangible protection to investors in the event of external shocks,” says Emeka Ucheaga, head of Research and Business Intelligence at Credit Direct, a Lagos- based finance company.

While the economy showed signs of recovery with stronger GDP growth in the second and third quarters of last year, macroeconomic fundamentals remain fragile, Ucheaga warns; inflation continues to run high, undermining purchasing power and investor returns. From 23.8% in December, the rate only declined to 23.1% in February, according to official figures.

The Ghanaian cedi, which briefly rallied toward the end of 2024, has since reversed, declining 5.3% in the first quarter.

A Glass Half Full

“These indicators, taken together, highlight a country still in the early stages of stabilization rather than in a phase of renewed investor confidence,” Ucheaga argues. Fluctuations in FDI reflect this uncertainty. Despite improved trade figures and IMF support, he says, investor sentiment is still weighed down by memories of Ghana’s December 2022 debt default and an increasingly uncertain global economic environment marked by rising protectionism and the looming threat of a global trade war.

“For Ghana to reverse this trend, it must demonstrate a sustained commit- ment to economic stability,” Ucheaga says. “That means consistently growing the real economy, maintaining a trade surplus, and steadily accumulating foreign reserves from credible, non-debt-driven sources.” Inflation must be brought under control and the exchange rate stabilized to protect investor value; he adds. The government has set goals of an end-of-year inflation target of 11.9%, an overall real- GDP growth rate of at least 4%, and non-oil GDP growth of 4.8%.

“Until these improvements are both visible and durable, investors are likely to remain cautious about reentering the Ghanaian market,” he warns.