Government securities are essentially IOU declarations (or debt instruments) by the Government in terms of the State Finance Act of 1991. Namibian Government securities are issued in the form of Treasury Bills (TB’s) and Internal Registered Stock (IRS).
Government securities are a major means of financing Government deficits. The Namibian Government, like any other government, finances its operations largely through taxation and levies.
In cases where revenue received from taxation and levies is less than expenditure, the government finances the difference (that is, the deficit) mainly through borrowing by issuing government securities. These securities also provide additional investment avenues for investors.
Although the public has various avenues in which to invest their savings, government securities offer the most secure investment. It rarely happens that a government fails to honour its obligations issued in its own currency.Therefore, these securities tend to be highly marketable and liquid, that is, they are in high demand and can easily be bought and sold in the secondary market.In addition, government securities provide an additional liquid investment outlet for financial institutions, mainly commercial banks, in which they can invest their surplus funds and which can also be sold when they need to supplement their cash resources. Banks can also hold Government securities at the Bank of Namibia as collateral against borrowing and for liquid asset requirements.
The Bank of Namibia places advertisements on its website, on the Reuters System, and send e-mails officially inviting the public to participate in tenders for Government securities. Advertisements inviting tenders for Treasury Bills and bonds are placed one week prior to auction date.Tender forms may be obtained from the website and Bank of Namibia at 71 Robert Mugabe Avenue in Windhoek on each business day subsequent to the announcement of an issue. Completed tender forms are submitted in sealed envelopes addressed to The Deputy Director: Investments and Domestic Markets pision and deposited into the designated tender box by 10:00 at the Bank on the auction date stated in the advertisements. Alternatively, tender forms can be sent to the Bank via its dedicated fax number.In the case of institutions and where agents are involved, tender forms must be signed under a power of attorney and accompanied by the original power of attorney.
For TB’s allotments are made in a descending order of bid prices, meaning that the most attractive (i.e., relatively high) prices stand a better chance of getting an allotment, because a relatively high price subjects the Government to lower cost of borrowing. However, for IRS allotments are made in an ascending order of yield to maturity.
Bids for TBs must be for a minimum of N$10 000. For bonds the minimum is N$50 000, but, larger amounts can be tendered for in multiples of N$10 000. Successful bidders are required to provide payment at the Bank of Namibia, not later than 10:00 a.m. on the next business day following the announcement of the allotment on the auction date. Settlements by commercial banks can be made through NISS (Namibia Inter Bank Settlements System), or authorizations to debit the accounts of those banks with the Bank of Namibia. For others, that is, businesses and inpiduals, settlement can be made in the form of bank cheques. Personal cheques and cheques certified or guaranteed by banks are not acceptable for settlement. All amounts paid by inpiduals exceeding N$5 million should be paid through the NISS system.