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GOVT WANTS TO BORROW N$2,64B ON FRIDAY

By: Nghiinomenwa Erastus

As parents rush to buy their kids school uniforms and stationeries, the central bank is also in the same rush selling bonds and treasury bills to fund the country’s overstretched budget.

The central bank started the year off seeking/borrowing N$1,2 billion from households and other big investors on 6 January, through its short-term borrowing instruments Treasury Bills (TBs).

Just last week again, the central bank was back seeking more as instructed by the treasury/Ministry of Finance.

This time it wants to borrow N$2,64 billion by the end of this week through TBs and fixed income long-term instruments/bonds.

The Bank of Namibia announced their borrowing intention through two tender invitations released last week and yesterday.

The auction seeks to give households with some savings and institutional investors investment opportunities either to diversify their portfolios or start their investing journey.

Out of the N$2,64 billion, the central bank announced that it would borrow the N$1 billion through treasury bills, using six months and nine months treasury instruments.

Those with savings but do not want to invest for more than a year can lend to the government through the two treasury bills that will be auctioned on Thursday this week.

Through treasury bills, the central bank seeks to borrow N$500 million under the six months treasury bills- while the remaining N$500 million will be borrowed through the nine months treasury.

To buy a unit in the two, one needs a minimum of N$10 000 to participate in the auction. Those successful should settle their commitment by Friday the 14 January.

Treasury bills are sold at a discount, and at maturity, the investor gets the full amount/price as their reward for lending.

On Friday this week again, the central bank will auction units in 14 of its internal registered stocks, bonds to raise N$1,64 billion for the country’s treasurer.

Individuals and institutional investors will have a wide range of bonds to choose from depending on how long they want to give up their money and the reward/return they seek.

The shortest period one can give/lend their money to the government is until 2023 through the GC23, offering a coupon rate (interest) of 8,85%- the government want N$140 million through this bond on Friday.

Or go for a GC30, where the government will return your money by 15 January 2030, offering you a coupon rate of 8% annually for using your money- the treasurer needs N$140 million.

The longest one can give up their money for government utilization is through the GC50, which is maturing in July 2050 and offering a 10,25% coupon annually- the government wants N$100 million through this bond on Friday.

One does not need to hold their investment till the bond matures. Since the bonds are trading in the secondary market/Namibia Stock Exchange, they can sell their portion through the exchange.

Those willing to lend to the government through the Friday auction on the highlighted bonds need to have at least N$50 000, and if they succeed at the auction, the money should be paid to the central bank by Monday the 17 January.

Upon receipt of the full amount payable in respect of an accepted tender, a Registered Stock Certificate in respect of such tender will be issued, indicating that the government owes the investor.

The allotment of the issue will be determined by the Bank of Namibia as soon as possible, following the closure time of the bids.

Allotments to investors during the will be made in ascending order of yields.

If the bank raises all it intends to borrow on 17 January 2022, it will bring the money borrowed by the government since the beginning of 2022 (in two weeks) to N$3,8 billion from local investors.

This is part of the borrowing strategy of the ministry of finance to meet the N$29,4 billion funding gap currently experienced by the government.

The central bank executes the strategy by reaching out to the market through TBs and bonds auctions. Email: erastus@thevillager.com.na

 

Julia Heita

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