For instance you may not need the money for another 3 months or so but you cannot afford to lose it, this means that you need a risk free investment. There are probably very few investments that can be classified as safe and risk free. This is what makes investing in government securities (Treasury Bills and Bonds) a very attractive prospect, especially for conservative investors.Currently the yields (interest) ranges between 12% to 16%. You can get updates on the Bank of Uganda website for those investing in Uganda.
For short term cash flow management, investing in Treasury Bills is a good option to consider and earn a reasonable interest. You can time the maturity dates to when the funds will be needed. Treasury Bills are structured in three maturities: 91-days, 182-days and 364-days and issued every fortnight. Treasury Bills are government security and are issued at a discount and offer a competitive rate of return.
You can invest in the Bank of Uganda (BoU) Treasury bills with a minimum of Ugx100,000. The sum invested should be in Bids must be in multiples of Ugx100,000. Bid volumes ranging between Ugx100,000 and Ugx200,000,000 are classified as non-competitive. Bid volumes of Ugx200,100,000 or more are classified as competitive.
The difference between competitive and non-competitive bids is that with the former, you must indicate the rate/price you would like to earn on your money invested and the bid must be above Ugx200M. On the other hand, non-competitive bids range from Ugx100, 000 to Ugx200M and the investor does not choose his own interest rate when bidding; non-competitive bidders take a market determined average rate from the auction. In this regard, all bids must be submitted through a primary dealer and must reach the BOU headquarters by 10.00am on the day of the auction.
Regarding payment, all successful bids must be paid for on the next business day after the auction. The primary dealer is responsible for payment of all the bids of his participants (individuals and organisations).
What you need to do is open a Central Depository System (CDS) account at Bank of Uganda by filling CDS Form 1, CDS Form 7, CDS Form 9A/B, CDS Form 8(if it’s an organisation) and sign a CDS Dealing Agreement. You then have to submit these account opening forms through your primary dealer bank for their endorsement and know-your-customer purposes. These forms are available at BOU website as well as from the primary dealer banks.
To participate in an auction, a registered investor submits bid orders through a primary dealer. These are commercial banks appointed by BOU and include: Stanbic Bank, Standard Chartered Bank, Barclays Bank, dfcu bank, Bank of Baroda and Centenary Bank.
ADVANTAGES OF INVESTING IN UGANDA GOVERNMENT SECURITIES
• They offer a competitive rate of return
• They are risk-free instruments
• Saving mechanism
• They are very liquid; can easily be sold in the secondary market
• They can be pledged as collateral for borrowing
“Guard thy treasure from loss by investing only where thy principal is safe, where it may be reclaimed if desirable, and where thou will not fail to collect a fair rental (interest)” George Samuel Clason
To your success!
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