Rwanda bond over scribed by 140%

KIGALI, Rwanda - Rwanda’s $18.3 million (Rwf 12.5bn) Treasury Bond which was oversubscribed by 140 per cent over a week ago by local investors has been listed on the Rwanda Stock Exchange (RSE).

The bond, which closed on Thursday February 27th, recorded the highest number of applications since its debut in 2008 according to the Minister of Finance and Economic Planning, Amb. Claver Gatete.

“The National Bank of Rwanda received 56 bids from different categories of investors, with banks accounting for 52.85%, institutional investors 46.16% and retail investors 1.2 per cent,” he said during a news conference after the bond closure.

The government, through the National Bank of Rwanda (BNR), started accepting bids from investors on Monday 24th last month ranging from Rwf100,000 to Rwf50 million (about $72,000) and closed the process having raised more than what they had asked for by 40% (Rwf 5bn).

BNR employed book building method to determine the price of the bond with the initial guidance announced at upper 11%, but was later revised to between 11.575% and 11.625%, closing at 11%.

The bond closed with a coupon rate of 11.475%.

Gatete said it was now chance for those who hadn’t participated in the primary market to participate in the trade of paper bonds through the secondary market (RSE).

“It is important we grow the culture of investing through the capital markets because one is assured of the returns on investment while at the same time saving,” he said.

He said in countries where the capital markets were developed, it was also easier for the country to raise funds for economic development, therefore reducing the need for foreign aid.

He said, “There are also foreign investors who before setting up their companies in Rwanda, want to see how the capital market is performing first, invest in it and once they are able to earn from it, they are ready to set up shop in the country.”

Gatete said the government was committed to the regular issuance of Treasury Bonds to develop the local capital market and to promote the culture of long-term savings through the securities exchange.

According to a finance ministry statement, next issuances are scheduled for May, August and November.

Celestin Rwabukumba, chief executive officer of the RSE said the main motive of issuing bonds was to mop up liquidity in the economy while at the same time raising funds for government projects in its annual budget.

“We are looking at making the bond market more active and once it is so, the government will even be issuing these bonds on a weekly or daily basis,” he said.

Rwabukumba said the coordination between the Ministry of finance and BNR was commendable in that the two worked together to see inflation was kept in check.

“They coordinate all the debt instruments well enough and come to the right decisions,” he said.

The government has been using short-term instruments such as Treasury-bills that range from 91 to 182 days. Following the resumption of donor aid last year, the government reduced borrowing from the domestic market as shown by interest rates on Treasury-bills, which fell to 5.6 per cent as of December last year, down from an average of 12 per cent in April the same year.

Rwabukumba said the other aim of the issuance was to also set a benchmark for the private sector to start investing in the bond market.

The RSE currently has three government bonds, and an eight-year corporate bond worth Rwf10bn issued in 2010 by I&M Bank (formerly Commercial Bank of Rwanda).

By Geoffrey Kalenzi, Monday, March 10th, 2014


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