Amidst mounting concerns about Uganda’s economy’s debt crisis, the total value of refinanced government securities exceeded 50% of all Treasury Bills and bonds issued in the fiscal year 2023–2024. This scenario portends higher borrowing prices.

Rolling over maturing Treasury Bills and bonds by extending their expiration date, paying outstanding interest, and applying new pricing terms are all considered forms of refinancing government debt securities.

According to the Finance Ministry’s most recent data, the entire projected value of refinanced securities was estimated at Ush8, 358.5 billion ($2.2 billion) during the same period, while government-issued Treasury Bills and bonds were valued at Ush15,021.3 billion ($4 billion) in the fiscal year 2023–2024.

The remaining Ush6, 662.8 billion, or $1.78 billion, was set aside to pay for regular budgetary expenses.

The data shows that Treasury bonds worth US$ 893.4 billion ($238.5 million) were refinanced in June 2024, whereas Treasury bonds worth Ush599.7 billion ($160 million) were refinanced in May 2024.

July 2024 saw the raising of a total of Ush1, 576.3 billion ($420.9 million) from the domestic debt market.

According to the statistics, budget expenditure for the first quarter of 2024–2025 was allotted Ush1,048.6 billion ($279.9 million), with the remaining Ush527.7 billion ($140.9 million) going towards debt refinancing.

Financial market sources quoted by The East Africa that the primary objective of the refinancing operations is Treasury Bonds with high interest rates and a five- to 15-year lifespan.

“Whenever the government announces a refinancing exercise for some government securities, interest rates on Treasury Bills and bonds tend to go up because investors feel the government is desperate for money. However, the increase in government debt servicing costs tied to refinancing is not big. It could be less than one per cent to date.

When the total amount of maturing Treasury Bills and bonds plus investor interest exceeds available tax revenues, refinancing of government securities becomes essential. In such a case, paying debt redemption costs and interest might leave the government with no money left over for other budgetary goals.

Conversely, refinancing reduces the amount of debt owed by deferring redemption charges and paying off investor interest commitments.

Foreign investors are extremely concerned about inflation and exchange rate fluctuations in the local economy, while local investors are keenly interested in inflation movements and their impact on returns on investment,” according to Dr Kenneth Egesa, Communications Director of the Bank of Uganda (BoU).

“Refinancing involves rolling over maturities of government debt securities for a longer duration in the domestic debt market. Through refinancing, the government can borrow old money and take care of existing needs.

For example, the Ministry of Health recently requested cash of US$ 35 billion ($9.3 million) for the deployment of medical intern doctors, but this request has not been met due to severe budget cuts across all sectors.

“It has crippled government operations as there is limited liquidity. Some investors are looking at only short-term lending to government of not more than three years,” noted Dr Fred Muhumuza, a local economist.

One of Nigeria’s commodities trading organisations, A.R.N Foods, is making the move into rice milling and production. To process high-quality rice and increase food security in Nigeria, AGI Miltec, a global provider of grain processing solutions, has teamed up with A.R.N Foods.

Adelota Nola, the founder and CEO of ARN Foods, stated during the contract signing ceremony in Lagos on Friday, that his firm will use AGI Milltec’s cutting-edge solutions to process high-quality rice for the Nigerian market as part of their partnership.

Stressing that the collaboration is a team of experts to drive food sustainability and maximize the agricultural value chain which has remained under-explored in Africa. According to Nola, A.R.N. is taking the lead in finding a solution to the shortage of rice which has proven to be the world’s largest staple in demand.

Also in attendance was the Executive Director at Providus Bank, Mr Adeoye, the Chief Executive Officer of Parallex Bank- Olufemi Bakare, Executives from Lotus Bank, Media mogul Chief Dele Momodu and other top executives, partners and stakeholders.

“The deficit is very large. We can only start from somewhere. If we sleep and say the problems are so much and there is nothing we can do about it, then we will all just continue to sleep. But if we say we can do a little by taking the first step to solving the problem like we are doing today, then someone from somewhere can emulate what we are doing.

“If 100 people try to solve the problem, one day the problem will be solved. We have taken the first step to solving the rice deficit problem in Nigeria,” he said.

Vincent Joseph, the Business Development Manager for AGI in Nigeria, discussed the company’s history and experience that made it suitable for ARN’s ambitious goals. The company has over thirty years of experience operating throughout continents and Africa, and it has constructed over ten mill plants in Nigeria.

“The rice quality we see today is due to two reasons. One is the quality of paddy itself and the second comes from the way it is processed. There are still people over here that are using traditional methodology for processing and the quality of that will not be so good.

“We have 25 years’ experience in the rice milling sector. In Nigeria, we are not new. We know the quality of paddy and the requirements. We would like to bring the same quality to Nigeria. This one has been specifically designed for the Nigerian market and we already know the benchmark that Nola is looking for,” he said.

According to Joseph, the collaboration between the two companies would be smooth because A.R.N. Foods already has backward integration and is processing its rice paddies as the next natural step. He emphasised the solid engineering and financial foundation of AGI Milltec.

He also emphasized that the construction of the mill will be according to the acceptable standards from its parent country – Canada, thus issues around managing emissions from the mill plant will not arise.

Currently, Nigeria produces more rice than any other country in West Africa. The nation consumes more rice than any other country in the region in absolute terms because of its massive population. The average national production of milled rice is 3.3 million tonnes, compared to an anticipated 5.2 million tonnes of yearly consumption. But post-harvest loss remains one of the biggest challenges in the rice farming space, with private investment like ARN geared towards the space, it is yet to be seen if local rice production can become sufficient, and become export goods in the global highly competitive market.