Ministry of Finance treasury officials and their counterparts at the Bank of Ghana are reportedly considering closer co-ordination going forward to resolve an emergent issue in Ghana’s evolving fixed income market — a subtle but increasingly consequential contest that is unfolding between the Bank of Ghana (BoG) and the Government of Ghana for the same pool of liquidity—commercial bank funds. At the heart of this dynamic are Bank of Ghana bills, issued for Open Market Operations (OMO), and Government of Ghana treasury bills (T-bills), the state’s primary short-term borrowing instrument.
Since mid – March 2026, a string of under-subscribed T-bill auctions has raised concerns about weakening investor appetite. The question now confronting market participants is whether BoG’s own liquidity management instruments are inadvertently competing with, and potentially crowding out, government securities.
A Pattern of Weakening Demand
Recent auction data shows a shift away from T-bills. Last week, seeking to raise GH¢4.475 billion to fund its operations and refinance maturing debt, government fell short of its target, but by just 0.92 percent. As government targeted GH¢4.475 billion, investors offered a total of GH¢4.433 billion, but government ultimately accepted only GH¢3.897 billion across the three tenors – 91, 182 and 364 days. But instructively, the GH¢577.9 million shortfall marked the 6th consecutive time this year that government has been unable to secure its full budgetary requirement from the Treasury bill market.
At the previous auction, on April 17 the government raised about GH¢4 billion against a target of GH¢4.89 billion although actual bids reached GHc4.49 billion—an effective under-subscription of some GH¢400 million or 8 percent. Even where bids have been strong at the short end, they have not always translated into full uptake across the various tenors; demand remains concentrated in 91-day instruments, reflecting investor preference for liquidity amid uncertainty.
BoG Bills vs T-Bills
At a structural level, BoG bills and T-bills share key similarities: both are short-term, cedi-denominated, and largely subscribed to by commercial banks. However, their objectives—and increasingly their market appeal—diverge.
Government’s T-bills are used to finance its fiscal operations including the refinancing of maturing debt obligations. Yields in April 2026 have been relatively modest, with yields on 91-day bills averaging 4.92 percent, 182-day bills around 6.96 percent and 364-day bills about 10.12 percent.
These rates reflect Ghana’s fiscal consolidation, ongoing disinflation and a reduced policy rate environment, with the BoG policy rate cut to 14 percent in March on the back of inflation having fallen to a little above 3 percent.
By contrast, BoG bills—though less publicly discussed—are typically priced more aggressively to achieve liquidity sterilization objectives. BoG’s Open Market Operations instruments usually carry slightly higher effective yields at the short end (currently with tenors of 14 days and 56 days) to incentivize banks to park excess liquidity with the central bank rather than deploy it elsewhere which could stoke demand pull inflation and cedi depreciation.
A senior treasury official at a leading commercial bank, speaking on condition of anonymity, noted: “When BoG wants to mop up liquidity quickly, it prices its bills to be competitive—sometimes more attractive than T-bills on a risk-adjusted basis.”
BoG bill issuance has been relatively frequent and flexible, often conducted multiple times within a week depending on liquidity conditions. This contrasts with the government’s weekly auction cycle.
The cumulative effect is significant: BoG is able to absorb liquidity opportunistically and in sizable volumes, particularly during periods of excess liquidity in the banking system. This can directly reduce the funds available for T-bill subscriptions.
It is instructive that the BoG has significantly expanded liquidity absorption operations in recent months, mopping up GH¢389.1 billion in the first quarter of 2026 compared to GHc46.4 billion during the corresponding period of last year. Market sterilization volumes accelerated sharply, exceeding GH¢100 billion in each of 2026’s first three months.
A BoG official involved in market operations explains that “Our mandate is price and monetary stability. If liquidity conditions require intervention, we act. It is not about competing with government borrowing—it is about managing inflation and liquidity.”
It is noteworthy that in the first quarter of 2026, total bids for government treasury bills reached GH¢164.1 billion but only GH¢104.1 billion was accepted, leaving nearly GH¢60 billion untaken. This gap effectively injected liquidity back into the financial system requiring BoG intervention to absorb it.
Perhaps the most decisive difference between Treasury bills and BoG bills however lies in tenor structure.
BoG bills are typically very short-dated—usually 14-day and 56-day instruments—compared to T-bills’ 91-day, 162 day and 364-day maturities and this gives banks the crucial advantage of flexibility.
In a declining interest rate environment, shorter tenors allow banks to reinvest quickly at potentially better rates, manage liquidity risks more dynamically and avoid locking into longer-term yields that may become unattractive sometime during their tenor.
A treasury dealer at a tier-one bank put it succinctly: “With BoG bills, you’re not stuck. You can enter or exit in two weeks or a month and adjust your strategy. That flexibility is valuable right now.”
This preference aligns with broader market behaviour, where demand has skewed heavily toward shorter-duration assets.
Are BoG Bills Crowding Out T-Bills?
The evidence suggests that while BoG bills are not the sole cause of T-bill under-subscriptions, they are a contributing factor.
By design, OMO operations withdraw excess liquidity from the banking system. When BoG issues bills aggressively banks allocate funds to those instruments and thus available liquidity for T-bill auctions declines and so government faces weaker demand
This is particularly impactful when both instruments are issued within close timeframes.
Even marginal yield differentials can sway allocation decisions, especially in a low-yield environment. If BoG bills offer slightly better short-term returns with lower duration risk, banks rationally prefer them.
Banks are increasingly optimizing portfolios for liquidity and flexibility rather than just yield. In this context, BoG bills serve as both an investment and a liquidity management tool—making them doubly attractive.
However, attributing T-bill under-subscriptions solely to BoG competition would be overly simplistic. Other dynamics are at play too.
Lower returns in the form of falling yields reduce investor appetite overall for treasury bills. Faced with this banks are diversifying into loans and other securities including medium term government bonds traded on the secondary market and corporate securities Furthermore, uncertainty about government borrowing needs arising from frequent T- bill bid rejections may be influencing demand.
Competition, But Not Conflict
The coexistence of BoG bills and T-bills reflects a broader coordination challenge between monetary and fiscal policy.
If not carefully managed, the interaction can create crowding-out effects within the domestic market, volatility in auction outcomes and conflicting signals on the directions of interest rates.
Going forward, closer alignment between the BoG and the Ministry of Finance may be necessary to harmonize issuance calendars, reduce direct competition for liquidity and ultimately maintain stable funding conditions for government. This is what the closer collaboration under consideration between the two institutions would set out to do.
BoG bills are indeed competing with T-bills—but not in a zero-sum sense. Rather, they are reshaping the behaviour of commercial banks in a more sophisticated, liquidity-sensitive market.
The recent under-subscriptions of T-bills since March 2026 are partly attributable to this dynamic, particularly through liquidity absorption and the appeal of shorter tenors. However, broader macroeconomic trends and evolving investor preferences are equally important drivers.
By: Toma Imirhe / businesspostonline
