The Bank of Ghana has new introduced guidelines for the government securities market, primary dealers and bond market specialists.

The purpose of these guidelines is to guide the purchase of government securities in the domestic market to the provisions in the Public Financial Management Act, 2016 (Act 921).

According to the Central Bank, the guidelines shall be used with reference to other directives issued by the Ministry of Finance.

Also, securities issued shall be denominated in the local currency-Ghana Cedis (GHS) except when explicitly stated by the Ministry of Finance.

Importantly, all payments in respect of subscription and redemption shall be made in the currency of issuance.

Wholesale auctioning

The Wholesale auction is the primary market for the issuance of Government of Ghana (GoG) and BoG securities, and it is opened to only authorised dealers – Primary Dealers.

Accordingly, all primary dealers must participate in the primary auction of Treasury bills by purchasing bills for their own accounts and for their trading books.

Notification of Issuance

The Finance Ministry shall also publish the Medium Term Debt Strategy (MTDS), the Annual Borrowing and Recovery Plan of the financial year and a quarterly rolling calendar for the issuance of government securities.

Based on the published calendar, the Ministry of Finance (MoF) shall announce within a week before an auction, the amounts and specific details of the financial instruments available at the next auction and their maturity profiles.

For the issuance of notes and bonds, a prospectus will also be published in the daily newspapers and on MoF and BoG websites on periodic basis.

Pricing and Allotment

Competitive bids will be ranked in descending order of price or ascending order of discount/interest rate.

According to the Bank of Ghana, bills will be sold to applicants whose competitive bids are at or above the lowest price or at or below the highest rate at which the auction committee will decide that any competitive bid should be accepted.

Payment and settlement

Unless otherwise announced, the settlement period for primary issues of government treasury bills shall be T+1, that is, the first working day after the auction

Background

In 1987, the BoG introduced the weekly treasury bills tender process. The securities market at that time was opened to banks, discount houses and the general public, although the public had to submit their applications through their respective banks.

From 1992, the BoG abolished all direct controls of monetary policy management and resorted primarily to Open Market Operation in conducting monetary policy.

In 1996, the BoG introduced the wholesale auction and a system of primary dealers in the government securities (G-Secs) market intended to enhance the ability to achieve adequate funding for the GoG’s Public Sector Borrowing Requirement through the development of reliable primary and secondary markets.

In 2015, Government announced changes to the issue and trading of GOG securities, limiting the number of institutions that could act as Primary dealers.