African government bonds stands in marked contrast to turnover ratios of 0.3 percent for Nigeria, nil for Cape Verde, and less than 10 percent for Côte d’Ivoire, Mozambique, Senegal, Tanzania, and Zambia.

Except in a few countries (Cape Verde, Namibia, Nigeria, South Africa, and Zambia)—and with the exception of some ad hoc issues (by Ethiopia, Lesotho and Malawi)—the focus countries have issued securities with tenors of more than one year only in the past 10 years.<sup>**47**</sup> Moreover, issues are infrequent. Even in South Africa, the government issued bonds only periodically “on demand” in the decade following the first issues in the late 1970s, and there was no active secondary market and no refined yield curve, with the introduction of government benchmark bonds being a relatively recent phenomenon.<sup>48</sup> Nigeria began issuing bonds in 1961, less than a year after independence, but an 18-year period of nonissuance ended in 2003, when the federal government declared its intention to retire short-term government securities and to finance budget deficits with limited recourse to medium-term debt securities (Federal Government of Nigeria bonds). These longer-tenor issues are also intended to provide a benchmark yield for issues by the corporate sector. In recent years, governments have been issuing debt securities at longer tenors with two goals in mind: first, to lengthen the maturity profile of government issues to establish a benchmark yield curve for later corporate and parastatal bond issues as part of an overall aim to develop local capital markets and, second, to improve debt management.<sup>49</sup> A few of the countries that do not yet issue government bonds have indicated their intention to do so as part of a plan to develop long-term finance. This will be feasible only if macroeconomic stability can 47 Several “special issues” in Ethiopia, Lesotho, and Malawi are a partial exception to this statement. In the late 1990s, the Lesotho government made 5- and 10-year issues of special-purpose bonds to finance the restructuring of the Lesotho Bank; the 10-year issue remains outstanding and matures in 2009. The Central Bank of Lesotho was unable to release data or other information on the outstanding bond issues, for reasons of confidentiality (Treasury Operations, CBL). For Malawi, there are two “special issues” of government securities for 25 years, issued in June 1983; otherwise, the longest maturity term for outstanding government securities is 13 years; in the recent past, the Malawi government has not favored issuing bonds, deeming them a less attractive financing instrument than treasury bills, owing to uncertainty on the future movement of interest rates on government securities (Reserve Bank of Malawi). The Ethiopian government occasionally issues bonds to finance expenditures or absorb excess liquidity in the banking system, but the twice-monthly auction of treasury bills is the only regular market for securities transactions.

48 In 1989, the South African government consolidated several smaller issues by reissuing new 5-, 10-, 15- and 20year benchmark bonds (South Africa National Treasury, _South Africa Case Study on Debt Management_ , June 2003). 49 This is illustrated, for example, by the stated aim of domestic debt management under the Nigerian authorities’ core economic reform program, to restructure the government’s domestic debt portfolio by issuing more securities at longer tenors and to restrict the previous practice of monetizing fiscal deficits. This stands in contrast to a case such as Botswana (mentioned here for comparator purposes, although not covered in the cross-country Diagnostic analysis), in which the government has also been issuing debt securities at longer tenors, although raising financing has not been an aim in issuing local currency government debt securities, given a track record of overall budget surpluses over much of the past two decades. In this latter case, rather, local capital markets development has been the primary stated reason for issuance of government debt securities.

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