Ghana to Fire Primary Dealers Missing Bond Auction Quotas

Ghana’s central bank said it plans to fire some primary dealers of the nation’s bonds for failing to take their share of securities at weekly auctions, pressuring other traders to pick up the slack.

“Primary dealers are supposed to buy 7 percent of the amount of bills and notes offered,” Adams Nyinaku, head of treasury at the Accra-based Bank of Ghana, said by phone today. “Our quarterly appraisal shows some of them are under-performing. We may drop some of the current primary dealers and add those on the waiting list.”

When a brokerage doesn’t take its full proportion of bonds, other dealers are compelled to step in and buy extra, for which the central bank pays a fee. Traders purchase 91- and 182-day bills and one- and two-year notes at auctions held every Friday, either for themselves or customers. The plan to remove dealers comes as the central bank considers measures to boost trading in the secondary bond market by compelling banks to set aside more capital for dealing.

“If you are liquid it wouldn’t be difficult for you to demand a lot of the bonds at auction,” Albert Dansoh, a trader in the treasury department of Merchant Bank Ltd. said by phone today. “From the funds that banks mobilize, they must in the first place meet the central bank’s 9 percent reserve requirement, and then create assets such as loans” before making allocations to the government securities, he said.

With liquidity, banks can also market the treasury bills and notes to investors, Dansoh said.

Secondary Market

The central bank is planning regulations from next year aimed at deepening the secondary bond market, Nyinaku said.

“We need rules regarding issues such as pricing and underwriting,” he said. “The minimum capital requirement for banks is 60 million cedis ($31.7 million) but we want primary dealers to reserve part of their portfolio for secondary trading.”

While foreign investors are allowed to directly buy Ghana debt with duration of more than three years, they can only purchase shorter-dated notes on the secondary market.

There are times when investors want to redeem debt before maturity and the central bank wants lenders “to be able to settle among themselves and not fall on the central bank for lack of liquidity,” Nyinaku said.

Banks in the country have a challenge in raising deposits, because they compete with non-bank financial institutions that offer “very attractive rates,” Merchant Bank’s Dansoh said.

Barclays Plc, Standard Bank Group Ltd., Standard Chartered Plc, Ghana Commercial Bank Ltd., Ecobank Ghana Ltd., SG-SSB Ltd., Agricultural Development Bank of Ghana and Access Bank Plc are currently primary dealers. The rest are Cal Bank Ltd., United Bank for Africa Plc, Merchant Bank, Fidelity Bank of Ghana, Bank of Africa Ghana, ARB Apex Bank Ltd. and the state-pension fund, Social Security and National Insurance Trust.

To contact reporter on this story: Moses Mozart Dzawu in Accra at +233-302-258-797 or

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