Ugandans have been advised to invest in treasury bills and bonds as government looks forward to borrowing Shs 1trillion for infrastructural development. Government through Bank of Uganda (BOU) borrows money by issuing Treasury Bills and Bonds, mostly on a monthly basis for a tenure of 3months to 10years.
In this financial year it is even more lucrative as government intends to borrow at least Shs1trillion for infrastructure purposes. This opportunity, however, is mostly taken on by offshore investors, commercial banks and NSSF.
Phillip Odera, the Managing Director, Stanbic Bank Uganda while receiving an Award on behalf of his bank for being the best dealer in government securities from BOU, said that these were risk free instruments and had attractive returns.
Most commercial banks also turn to government instruments because they offer a safe haven instead of them lending to the private sector, which is high risk. The returns on government securities are between 9percent and 12percent depending on the tenure. This rate, according to Dr Louis Kasekende the BoU Deputy Governor, is a higher return compared to that offered by commercial banks on fixed deposits.
Uganda’s private savings are only at about 12percent, a low figure compared to Kenya. Dr Kasekende says there is need to shift money from consumption to savings. He notes that it is both the responsibility of Ugandans to save and institutions like BoU to educate Ugandans on the savings and investments options. Dr Kasekende says it is not too late for this shift to take place
Stanbic Bank Uganda emerged as best dealer of government securities in 2013, for the third time in nine years. For Ugandans to participate, they’d have to invest as low as Shs100,000 through a commercial bank. At the peak of high interest rates in 2011 and 2012, commercial banks retreated to government securities instead of the private sector because of the risks involved. Often, when rates on government securities are attractive, private sector lending slows.