Tanzania’s bond market takes a major step towards greater transparency

The Bank of Tanzania has made a significant announcement regarding a pivotal reform aimed at enhancing transparency in Treasury bond pricing, set to take effect on April 2, 2025. This new policy requires investors to break down their bids into clean price, accrued interest, and settlement price, marking a major step towards fostering transparency and confidence in the Tanzanian bond market. To delve deeper into the implications of this reform, Aleck Ngoshani, a Market Analyst and the CEO of Wealthora Company Ltd., provided valuable insights in a recent interview with CNBC Africa's Tabitha Muthoni. The decision by the central bank to mandate this level of pricing transparency was prompted by market inefficiencies and investor concerns. Previously, during government bond auctions, the focus was solely on the bid price and face value of newly issued bonds, neglecting crucial factors like accrued interest. With the introduction of reopened bonds, the lack of transparency in pricing became apparent, highlighting the need for a more comprehensive bid submission process. This move not only addresses the immediate need for transparency but also signals the bank's broader commitment to modernizing capital markets and attracting more foreign institutional investors. Aligning with international standards in disclosing clean and dirty prices is expected to enhance Tanzania's appeal to global investors, particularly from the East African and SADC regions. The transparency brought about by this reform is anticipated to boost investments and participation in the bond market, ultimately leading to improved liquidity in both the primary and secondary markets. The ease of bond comparability between primary and secondary markets, facilitated by this reform, is set to streamline transactions and further stimulate market activity. While the shift towards transparency is a significant milestone, it is also part of a larger initiative to encourage the adoption of more sophisticated debt instruments and drive capital market reforms. Looking ahead, Tanzania's bond market is poised to witness increased participation and enhanced liquidity, paving the way for a more robust and investor-friendly environment. In conclusion, the market infrastructure in Tanzania appears well-prepared to embrace this new era of transparency, with stakeholders welcoming the change as a positive step towards enhancing evaluation and transparency in government bond instruments.