Ghana records highest Treasury bill rates among 11 African economies

Ghana has recorded the highest Treasury bill interest rates among 11 leading African economies, according to the Databank Weekly Fixed Income Update.

The report indicated that Ghana’s 91-day Treasury bill rate stood at 18.23 per cent, while the 182-day Treasury bill rate was 19.26 per cent, the highest rates recorded among the countries surveyed.

Despite the high nominal returns, both rates remain below Ghana’s inflation rate of 23.6 per cent, resulting in negative real returns for investors in short-term government securities.

Databank Research noted that the persistent rise in inflation had significantly eroded returns on fixed-income investments, reducing the attractiveness of Treasury bills and complicating the government’s domestic borrowing programme.

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According to the report, the negative real yields could compel the Bank of Ghana’s Monetary Policy Committee (MPC) to tighten monetary policy further by increasing the Monetary Policy Rate, which then stood at 17 per cent, to help curb inflation and absorb excess liquidity in the economy.

However, the research also cautioned that liquidity conditions in the interbank market were already tight, warning that a significant increase in the policy rate could slow economic growth by raising borrowing costs for businesses and households.

Databank projected an overall increase of 200 basis points in the Monetary Policy Rate during 2022 but expected the MPC to delay an immediate increase in May, with a possible 100-basis-point adjustment later in the year.

The report added that higher interest rates would increase the cost of credit for businesses, raise production costs and make government borrowing more expensive.

Among the countries surveyed, Egypt ranked second with 91-day and 182-day Treasury bill rates of 13.67 per cent and 13.68 per cent respectively.

Nigeria recorded the lowest Treasury bill rates, with 1.74 per cent for the 91-day bill and three per cent for the 182-day bill.

Other countries in the survey included Tanzania, South Africa, Namibia, Rwanda, Uganda, Kenya, Zambia and Malawi, all of which recorded lower Treasury bill rates than Ghana.