[ 2016-12-06 ]

Matured bills & bonds reach GHC145bn in 2016
Total bills and bonds auctioned this year, from
January to October, by the government, Bank of
Ghana, and COCOBOD including already issued
longer-term bonds that matured this year, have hit
GH¢145 billion, data from the Central Securities
Depository has shown.

The successful issue of over GH¢145 billion debt
securities “may be partly attributed to the
attractive interest rates being offered to
investors in the debt market coupled with the
risk-free nature of such instruments,” an
analyst, who wants to remain anonymous, has said.

The data shows a jump from GH¢69.3 billion which
was recorded in the whole of 2015.

The over 100 percent increment in matured
securities is also as a result of the increased
activity by the central bank on the debt market
which saw it raise a total of GH¢93.3 billion,
representing almost 70percent of the total face
value of maturated debt instruments from January
to October, 2016.

A significant chunk of the securities were
purchased by banks and this is not surprising due
to the continuous rise in non-performing loans
which currently stands at 19.3percent, a rise from
14.7percent in 2015.

The latest Bank of Ghana (BoG) Financial
Stability, report covering operations of bank’s
for the first seven months of this year shows NPLs
has hit GH¢6.1 billion.

In 2015, commercial banks held about
GH¢12.2billion investments in debt securities but
from January to September, 2016, the levels almost
doubled to GH¢23.5billion.

With the 91-day, 182-day bill and 1-year notes
issued by government this year having recorded an
average interest rates of 22.76 percent,
24.57percent and 23.09percent respectively and the
equities market posting negative returns for two
consecutive years, banks and investors have
consistently looked up to the debt market for
higher returns.

With the central government raising
GH¢52.3billion in 2016 so far, the Central Bank
has, for the first time, overtaken the government
while COCOBOD raised a GH¢332.5 million in
182-day bills in January, 2016.

To underscore the weight of the Central Bank’s
activities this year, in January to October 2015,
for example, while the government raised GH¢44.9
billion, the Central Bank raised only GH¢4.8
billion, about a tenth of what the government
raised, with COCOBOD raising GH¢2.15 billion.

The BoG’s bills, raised in countless 14-day
bills at discount rates, according to analysts,
are to mop up excess liquidity and keep inflation
in under tight control. This has seen inflation
trickle downwards from a high of 19.2 percent in
March, this year to 15.8percent in October, 2016.

According to the Central Securities Depository,
since 2010 there has been a steady increase in
bills and bonds issued by the government, Central
Bank, COCOBOD and other banks.

From 14-day bills through 91-day, 182-day bills,
1-7-year notes, the value of the debts at maturity
increased from GH¢11.8 billion in 2010 to GH¢145
billion as at October, 2016.

The interest earned by the ever increasing
investors or beneficiaries also increased from
GH¢528.1 million in 2010 to almost GH¢3billion
in October, 2016.

Kofi Awuku, an executive with Barclays’s
Corporate and Investment Banking (CIB) Markets,
explained that the rise in bills and bonds shows
that government and the BoG needed to mop up
excess liquidity.

He added that, theoretically, these debts can fall
depending on the issuers. “This is within the
realm of the issuers. They are issued for a reason
and depending on the direction of the economy and
their plans,” he said.

Mr. Awuku added that should the government’s
other revenue sources increases then it doesn’t
have to issue more. “The issuers borrow for a
reason and so if conditions change and they have
no need for as much volumes then they will cut
down on that.”

Source - The Business & Financial Times

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