Soaring inflation rates and escalating benchmark rates in Africa has prompted central banks across the continent to issue treasury bills at rates closely mirroring these benchmarks.
Data tracking from Nairametrics displays a positive correlation between benchmark interest rates and 91-day treasury bills for many African countries. As the monetary authorities in these countries try to maintain market stability by providing clarity to investors.
For example, Egypt with an MPR of 27.25% currently has a yield rate of 27.208% on its 91-day treasury bills. Ghana with an MPR of 29.00% has a yield of 24.18% on its 91-day treasury bills.
Temitope Ejide, a Senior Fixed Income Analyst with Bloomberg noted,
“It makes sense that these countries are trying to make their T-bill issuances attractive from a yield perspective, because firstly, they need to raise capital to meet obligations. Budget deficits from a fiscal perspective continue to widen for most developing countries.”
African countries have a higher risk profile
According to Moody’s Analytics, average yields for US T-bills were put at 5.25%, Canadian T-bills had average yields of 4.89%, German T-bills yields were put at 3.48%, and Indian T-bills, 7.03%.
However, for African countries, the case was different, Nigeria had a yield rate of 16.24% on its 91-day T-bill, and Kenya had a yield rate of 15.73% on its 91-day bills.
- Ejide noted, “African countries are perceived to be riskier. Based on the global macroeconomic environment, inflation is high in those countries, and that is putting up pressure on rates.”
- “For investors, there is that demand that if ‘I’m going to take my money out of an economy with a stable currency and a stable economy, and put it in your emerging market, especially your local-currency denominated securities, I’m putting myself at economic risk, given that your economy is shaky.”
Top 10 T-bill yields in Africa (91-day)
- Rwanda – 8.80%
Rwanda’s most recently issued T-bills had a yield of 8.80% for the 91-day bills. With a benchmark rate of 7.5%, and an inflation rate of 0.6% as of March 2024, Rwandan T-bills have impressive yields.
- Namibia – 8.86%
Namibia’s most recent T-bill issuance occurred on April 11, 2024, with the yield rate on the 91-day bill at 8.86%. The country has an inflation rate of 4.5% as of March 2024 as well as a benchmark interest rate of 8.86%.
- Zambia – 9.5%
Zambia’s 91-day T-bills have a yield of 9.5%, representing a 300-basis point difference from the 12.50% benchmark rate set by the Bank of Zambia. With an inflation rate of 13.7% as of March 2024, the interest rate on the T-bills is effectively negative.
- Uganda – 9.602%
Uganda’s most recent T-bills issuance produced a yield rate of 9.602% on the 91-day bills. The country presently has an MPR of 10.00% as well as an inflation rate of 3.3% as of March 2024.
Uganda has one of Africa’s most stable currencies, combined with its general macroeconomic stability, the country’s T-bills are quite a staple for African-oriented investors.
- Kenya – 15.73%
Kenya’s 91-day T-bills were issued with a yield rate of 15.73%, representing a 2.73 %-point increase from the country’s benchmark rate of 13.00%.
With an inflation rate of 5.70%, the appetite of investors for Kenya’s short-term T-bills is evident in the country’s recent 410% oversubscription for its 91-day T-bills.
- Malawi – 16.00%
With an MPR of 26.00% and an inflation rate of 33.50%, Malawi’s 16% return on its 91-day T-bills depicts a negative real return. However, the country’s last issuance on March 26 was a successful issuance.
- Nigeria – 16.24%
Nigeria’s last T-bill issuance saw the 91-day T-bills issued at a yield of 16.24%, despite an MPR of 24.75%. With inflation at 31.90%, Nigeria’s T-bills offer quite a high negative real return, however, investors have a huge appetite for Nigeria’s T-bills due to the country’s credit ratings.
- Mozambique – 16.97%
Despite boasting an inflation rate of 3% as well as a benchmark rate of 15.75%, Mozambique has had to issue its 91-day T-bills at an astronomical rate of 16.97% due to its non-favorable credit ratings.
The country has a credit rating of CCC+ from both Fitch and S&P Global.
- Ghana – 24.18%
With its benchmark rate placed at 29.00%, as well as its inflation rate at 25.80%, the 24.18% yield set on Ghana’s 91-day T-bills is quite warranted.
With a widening budget deficit, as well as a short-term local currency rating of CCC+/C, the Ghanaian authorities have been under pressure to make their short-term offers as enticing as possible.
- Egypt – 27.208%
Egypt’s most recently issued 91-day T-bills had a yield of 27.208%, reflecting a correlation with the country’s MPR of 27.25%. With an inflation rate of 33.7% as of March 2024, Egypt’s T-bills post a negative real return. However, investors still display immense appetite for the country’s short-term issuances.
