Ghana’s financial market has been witnessing interesting developments in recent weeks, particularly in the Treasury bill (T-bill) auction results since new government was installed.
Ms. Gifty Annor-Sika Asantewah, a Financial Market Expert and President of Women in Forex Ghana, in an interview with the Vaultz News has stated that government’s rejection of significant amount of T-bills in the latest trading session is a sign that lower yields are on the horizon.
“The recent Treasury bill (T-bill) auction in Ghana has sent a strong signal to investors, policymakers, and market watchers: interest rates on government securities are set to decline. The government’s decision to reject GHS2.9 billion worth of bids—almost twice the amount rejected in the previous auction—demonstrates a clear intent to lower borrowing costs and stabilize the financial market.
“I believe this move is strategic and reflects Ghana’s improving macroeconomic conditions. It also highlights investor confidence in the economy, as seen in the overwhelming GHS10.5 billion in bids placed in the auction.”
Ms. Gifty Annor-Sika Asantewah
In the latest T-bill auction, Ghanaian investors—comprising banks, asset managers, pension funds, and individuals—showed an exceptional appetite for short-term government securities, offering GHS10.5 billion. This level of demand, according to Ms Annor-Sika, is remarkable and signals a high level of liquidity in the financial system.
However, despite the voracious appetite exhibited in the short end of the market, the government accepted only GHS7.3 billion of the bids, rejecting GHS2.9 billion.
“This decision was not due to a lack of demand but rather a conscious move to avoid borrowing at high interest rates. Essentially, the government is now in a stronger position to dictate the cost of borrowing rather than accepting high yields from investors who demand excessive returns.”
Ms. Gifty Annor-Sika Asantewah
Declining Treasury Bill Rates, A Positive Signal
The rejection of GHS2.9 billion in bids has directly impacted the interest rates on T-bills. The 91-day bill now has a lower weighted average interest rate of 26.1550%, while the 182-day bill has dropped to 25.0874%. “These declines indicate that the government is committed to reducing borrowing costs and that the days of excessive T-bill rates may be coming to an end,” she noted.
This development, according to the analyst is significant because it directly reduces the government’s cost of borrowing. She explained that when the government secures funds at high-interest rates, the national debt burden rises, making it more expensive to service debt obligations.
“By ensuring that Treasury bill rates decline, Ghana can ease its debt servicing costs and redirect resources toward critical areas such as infrastructure, healthcare, and education. This shift allows the government to focus on long-term economic development rather than being weighed down by excessive interest payments.”
Ms. Gifty Annor-Sika Asantewah
Additionally, Ms Annor-Sika noted that the strong participation in the auction reflects growing investor confidence in Ghana’s financial market.
“Investors are demonstrating their trust in the government’s ability to manage inflation and maintain economic stability by accepting lower yields on Treasury bills. This indicates a positive outlook for the country’s financial environment, as a stable market reassures both domestic and foreign investors, encouraging further investments in different sectors of the economy. The willingness of investors to lend at reduced rates also signals expectations of a sustained economic recovery.”
Ms. Gifty Annor-Sika Asantewah
Moreover, Ms Annor-Sika further explained that the decline in Treasury bill rates is a sign that inflationary pressures may be easing, contributing to the stabilization of the Ghanaian cedi.
She noted that high-interest rates often reflect economic distress, as investors demand higher returns to compensate for perceived risks. However, as rates decrease, it suggests that inflation is under control, which helps stabilize the local currency.
“A stronger cedi enhances business confidence, promotes investment, and reduces the cost of imports, ultimately benefiting the overall economy. This positive trend positions Ghana for greater financial stability and economic growth in the months ahead.”
Ms. Gifty Annor-Sika Asantewah
Why the Government Rejected GHS2.9 Billion in Bids
Ms. Annor-Sika noted that the government’s decision to reject such a significant amount of bids suggests a well-calculated approach to managing the economy.
“By choosing to accept only GHS7.3 billion out of the GHS10.5 billion offered, the government is signaling its confidence in the country’s economic trajectory and its commitment to responsible borrowing. This highlights a shift toward fiscal discipline, ensuring that borrowing costs remain manageable and do not exacerbate the national debt burden.”
Ms. Gifty Annor-Sika Asantewah
Ms Annor-Sika indicated that one key factor influencing this decision is the expectation of lower inflation. If inflation is projected to decline, the government has little incentive to accept high-interest rates today.
“Lower inflation reduces the need for investors to demand higher returns on their investments, allowing the government to borrow at more favorable rates. This, in turn, contributes to overall economic stability, as lower inflation preserves purchasing power and encourages investment in productive sectors rather than speculative financial instruments.”
Ms. Gifty Annor-Sika Asantewah
Additionally, the Bank of Ghana may be implementing monetary policies that support lower interest rates. Measures such as increased money supply and improved liquidity conditions can contribute to declining yields on government securities.
The analyst noted that the government’s stance also aligns with Ghana’s broader debt sustainability goals. With efforts focused on restructuring and managing debt more effectively, rejecting high-interest bids ensures that borrowing remains sustainable in the long run, preventing future financial distress and enhancing economic resilience.
Impact on Investors and Businesses
Ms Annor-Sika noted that the decline in T-bill rates will have a direct impact on both institutional and retail investors. While lower yields may mean slightly reduced returns for those investing in government securities, the long-term benefits to the economy far outweigh the short-term losses.
“As T-bill rates decline, banks may begin to adjust their lending rates downward. This means businesses and individuals could soon access cheaper credit, which would encourage entrepreneurship, investment, and overall economic growth.
“With lower yields on T-bills, investors may begin looking at alternative investment opportunities such as stocks, bonds, and real estate. This could lead to increased activity in Ghana’s capital markets.”
Ms. Gifty Annor-Sika Asantewah
The analyst further noted that lower borrowing costs often translate into increased disposable income for businesses and individuals, which can drive higher consumer spending and boost economic activity.
Ms Annor-Sika noted that if the trend of rejecting high-interest bids continues, she expects further declines in treasury bill yields. “The government is likely to continue managing borrowing costs strategically, leading to lower T-bill rates over the coming months.”
She also expects a stable interest rate environment which will enhance macroeconomic stability, attract foreign investment, and boost confidence in Ghana’s economy.
She noted that over time, banks may lower their lending rates, making credit more affordable for businesses and individuals.
“Ghana’s financial market is moving towards a new phase of stability, and as we navigate these changes, investors must remain strategic, vigilant, and forward-thinking.”
Ms. Gifty Annor-Sika Asantewah
All in all, she iterated that the government’s rejection of GHS2.9 billion in T-bill bids is a clear indication that lower yields are on the horizon. This is a positive development for Ghana’s economy, signaling improved investor confidence, reduced borrowing costs, and potential stability in inflation and exchange rates.
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