The recent 110% oversubscription may appear as a victory to the government after recording about 6 to 7 weeks of undersubscription, threatening its fiscal operations, but an analyst says it is premature for celebrations.
A leading market analyst says any form of excitement is misplaced and possibly misleading.
According to the Head of Finance at Merban Capital, Nelson Cudjoe Kuagbedzi, speaking to JoyNews in an interview monitored by The High Street Journal, explained that the impressive numbers have very little to do with improving investor confidence.
Instead, he says the oversubscription is simply the result of a much lower target set by the government for the week. In other words, to put practically, the standard was too low, and hence the government cannot rejoice for surpassing it.
He explains that the government went to the market hoping to raise just GH¢2.8 billion. But investors submitted bids worth a little over GH¢6 billion, with the government eventually accepting GH¢5.7 billion. The oversubscription, he stressed, is not surprising when you consider how small the target was.
“It is clearly as a result of the lower target that the government set for the week. Government, for the week, intended to raise about 2.8 billion Ghana Cedis, but the bids that were submitted were a little over 6 billion Ghana Cedis, and the government ended up accepting about 5.7 billion Ghana Cedis,” he explained.
He emphasized. “And so, the oversubscription for this week is basically a result of the lower target that the government set.”
He added that the treasury bill market behaves more like a refinancing platform for many investors, especially pension fund managers who are not allowed to keep funds sitting idle.
With few short-term alternatives available, these institutional investors will continue to channel money into 91-day bills, regardless of the interest rate.
This means their participation is driven more by necessity than optimism.
Nelson Cudjoe Kuagbedzi warned that using one week’s result to paint a promising picture of investor sentiment would be misleading. Investors who simply need to roll over their maturing bills or park funds temporarily will naturally keep participating, whether or not they feel confident about the broader economy.
He therefore recommends that the government look beyond a single auction and focus instead on sustained trends, market depth, and investor behavior across multiple weeks before making any bold declarations.
“We cannot just rely on a single auction for today, and just draw the conclusion that investor confidence is actually going up,” he stressed.
Last week’s oversubscription may look like good news on paper, but it is far from proof that investor confidence is returning.
