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¢145billion, 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¢69.3billion which was recorded in the whole of 2015. The over 100percent 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¢93.3billion, 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¢6.1billion.
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 22.76percent, 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¢332.5million 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 onlyGH¢4.8billion, about a tenth of what the government raised, with COCOBOD raising GH¢2.15billion.
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¢11.8billion in 2010to GH¢145billion as at October, 2016. The interest earned by the ever increasing investors or beneficiaries also increased from GH¢528.1million 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.”
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