In November and December 2010, the key debate in the Parliament of Ghana on a bill to assure the effective management of revenues expected from Ghana’s oil and gas production was whether or not to use the country’s petro-carbon resources as collateral for loans that the government may seek.

Many were the debates that raged not only in Parliament but also on radio and TV stations, with technical jargon translated into various Ghanaian languages, albeit with some difficulty. Eventually, the “Ayes” had it, to collateralise Ghana’s oil resources.

The “Nos” went home feeling a little bruised and dejected. But reflecting on this matter, a question arises as to why the nation seems focused on collateralising only its oil resources, gold or cocoa. Of course, it is understood that foreign lenders want to secure their funds with assets they consider as close to liquid cash as possible, readily tradable and recoverable. Cocoa and oil seem to be good assets for such tradability.

Nevertheless, some creative thinking within the government should also reveal that Ghana has a longer list of tradable assets that could in time be securitised for such transactions, if all we are seeking are national assets that could potentially be bought and sold, to be secured against foreign or even domestic borrowing.

After all, only last November a signing ceremony for the STX housing deal had to be called off at the Castle because a number of MPs on the minority side in Parliament had argued against and succeeded in getting removed a clause in the STX contract that would have pledged Ghana’s oil against the loan for this multi-billion dollar housing project. So here a major housing initiative was getting stalled because MPs believed Ghana did not have sufficient natural resources to pledge against its borrowings.

Prof. Hernando de Soto Polar, the Peruvian economist and a former central banker, who has visited Ghana several times, and who is President of the Institute for Liberty and Democracy, has argued in favour of the “wealth at the bottom of the pyramid”. He has written that if most poor people could simply get titles to the lands they lived on, they could use such titles as collateral, be eligible to borrow, and their lifestyles could change overnight. And such transformation, he believes, should be at the heart of any nation’s emergence from poverty.

It is little known by Ghanaians, for example that all the 30-odd castles and forts scattered around the coasts of Ghana, most of which are put to little use throughout the year, have monetary values that could be assessed, quantified, securitised, mortgaged, traded and indeed used for collateral.

Why not? Save the Osu Castle, which currently serves as the Office of The President, most of the castles, especially the larger ones such as those at Cape Coast and Elmina, simply stand against the buffeting winds and waves of the Atlantic Ocean year after year, earning Ghana very little by way of development resources. For the avoidance of doubt, using such edifices for collateral does not mean that they are suddenly to be owned by foreign entities, such as Chinese banks or even the governments of the lending countries.


If a 10-storey Foreign Ministry building goes up in smoke or a former President’s house gets burnt, government has no one to turn to for restitution.


It does mean though that should we fail to repay certain loans, ownership of such property would pass to the lender. But the beauty of mortgaging or collateralising the physical assets of Ghana, is that the buildings cannot be taken away, but the foreign owners, if it ever came to that would be empowered to valorise these relics of European colonisation and the slave trade, and to make better use of those properties than Ghana has so far done. After all, what would we have lost by handing over to European ownership fortresses that were built by Europeans in the 16th and 17th Centuries which we are not sure what to do with, if in the meantime a $200 million dollar loan (for which that Castle was collateralised) has enabled us to complete a railway line from Takoradi to Accra or from Tema to Ho?

At the personal level, many Ghanaians are familiar with cases where an individual who has taken too much credit from his local fufu chop bar and is unable to pay, has had to leave their wristwatch or other valuable with the chop bar owner as collateral, until the debt is paid. And there are some Ghanaian non-bank financial institutions which are quite famous for the speed with which they go after your collateral if you are unable to pay their exorbitant interest rates. Many sporting enthusiasts are aware that many of the sports stadia in Europe are owned by private companies or individuals. In the UK, most sports clubs own their own stadia. So, if the Accra Sports Stadium, for example, has a value of US$100 million, and the Kumasi stadium has a value of US$75 million, what stops the country from using these and other stadia, with a total value of say US$300 million as collateral to assure the development of an integrated aluminium industry for Ghana? In such an instance, nothing stops the selected stadia from being used as Asset-Backed Commercial Paper or even a Bespoke Collateralised Debt Obligation (CDO), a Collateralised Bond Obligation (CBO) or a Collateralised Mortgage Obligation (CMO), with smart investment banks in Ghana enjoying a “pass-through rate” for their fees.

What about the “pink lady”, the International Conference Centre? How much did it cost to build and what is its current value? If the Jubilee House (recently renamed Flagstaff House) cost more than US$100 million to build, then the International Conference Centre could easily be worth US$150 million, and the refurbished ‘Job-600’ (new Parliamentary office building) worth a possible US$300 million when completed.

The Job-600 is certainly as spacious and grandiose as the refurbished former Ambassador Hotel which is being re-constructed as a Movenpick hotel with money from Saudi billionaire Sheikh Al Waleed. And if the government is unwilling to use the Flagstaff House, at least it can use it as collateral to borrow some more money for more productive purposes, so that all the millions sunken into that house do not become worthless.

What is being suggested here is not so strange or outlandish. As a matter of fact, over the last 12 or so years, government has consciously raised revenues and increased the value of residential lands on which government bungalows had been built - mostly in Cantonments, the Airport residential area and Roman Ridge. In the process, it took inert assets of government bungalows being occupied by civil servants - and obtained liquidity from them, by selling the titles to these lands to interested domestic investors. So, there is no real difference in what is proposed here, except that collateralisation does not imply change of ownership, but a mere contingent liability.

For example, suppose that Ghana were to set up a National Assets Management Agency (NAMA), to take financial possession of its varied state assets that are lying fallow as inert investments with no yield potential, and the NAMA takes US$2 billion worth of mortgage loans, against these national assets, each of which pays even 10% interest to a foreign lender, and turns them into an 8% mortgage-backed security or a CDO for other investors.
The 8% reflects the pass-through rate, and the agency takes the remaining 2% as a cut of the proceeds, and may even share portions of this with a variety of institutional sales agents and intermediaries. NAMA would take measures to insure as many government properties as possible, almost all of which - ministry buildings, government bungalows, Presidential guest houses - remain uninsured today. Currently, when a 10-storey Foreign Ministry goes up in smoke, or a former President’s house gets burnt, government has no one to turn to for restitution. Today, Government believes in self-insurance. Then imagine the values of all the lands lying untitled from Kumasi to Bolga, or from Sunyani to Wa. Slowly, one begins to appreciate how Ghana may be holding back its own development.

In an age of American Depository Receipts, which allow Americans to trade in securities of foreign-based entities, in an era of Closed-End Investment Funds, Real Estate Investment Trusts, and Zero-Coupon Securities, the deepening of Ghana’s financial markets should permit greater free-range thinking, financial innovation and the creativity that allows entrepreneurs to create whole new businesses from thin air. But, if indeed most businesses are created from mere ideas, then conveyed into a business plan, how more solid could Ghana’s future be if it could convert its long list of inert national assets into breathing and vibrant financial instruments for national development? And this process could, in its wake, spew forth a whole new genre of financial intermediation firms and professionals, further deepening Ghana’s financial services, insurance, brokerage and securities industries.

So, yes, Ghana may have chosen to collateralise its oil and gas reserves. But as long as Ghana wants to be on a borrowing spree, why stop there? There are many more valuable national assets to collateralise: Akosombo Dam, Tema Harbour, National Theatre, Ministry offices, various SSNIT-owned mid-rise buildings.

If all these government properties were to be systematically surveyed and valued, and their titles legally established in the name of the Government, duly registered and perfected, Ghana could immediately enhance its borrowing capacity, especially on the back of its newly acquired middle-income status. There could be a new International Airport, somewhere in the middle of the Central Region, closer to the tourism sites, the new oil and gas fields, as well as our main raw materials of gold, cocoa and timber.

And a network of high-speed trains, bridges and new housing estates could dot the countryside, turning Ghana in just one generation of 25 years into a Dubai of Africa. Improbable as these ideas may seem to some, not all Ghanaians know that even airports do not have to be owned by the Government, or even if the Government owns them, their intrinsic value can be unlocked for the betterment of society today.

Do most Ghanaians know that a friend of Ghana Business & Finance, Adebayo Ogunlesi, a Nigerian investment banker formerly with First Boston Corporation and later Credit Suisse First Boston (CSFB) is now the Chairman of the private equity group which owns Gatwick Airport in Britain? Do we believe that some of the assets of that Airport could have been leveraged to maximise the financing that was used to purchase the Airport? Absolutely! Otherwise, what is a leveraged buy-out? In any case, the new owners can choose to use all or some of the airport as collateral for other transactions.

So there we have it. There is no limit, in scope or complexity - except for reasons of prudence in debt management - in how far Ghana can go as a nation to collateralising its assets - that is, if it has been decided that collateralising is the best way to go - to raise the badly needed financial resources to build and transform Ghana into the modern nation all stakeholders desire.