ACI members, within their respective banks, are at the forefront of helping the Government implement its fiscal policy as the main conduit through which Government borrows from the domestic market to help fund its budget deficit.
By Benoni Okwenje
Any sector that plays a major role in the growth and development of an economy must aspire to attain global standards by promoting professionalism through certification and human capital development.
It is for this reason that a good number of companies and their employees join professional associations, not only to gain access to business networks, but also have the opportunity to enhance their skillsets in order to meet international best practices and standards.
ACI Uganda, a non- profit financial markets association is one such organisation. It serves Uganda’s financial sector and is affiliated to ACI Financial Markets Association (ACIFMA), the global body established in 1955 that is focused on enhancing best market practice and supporting financial market participants to adhere to principles of ethical conduct.
As such, ACI Uganda’s membership consists of dealers in the treasury departments of commercial banks. The members of ACI Uganda, through the 24 commercial banks in the country, drive market growth, awareness and development. This is done through education via professional certification programmes, promotion of ethical market practices (guided by the ACI Code of conduct) and by building professional networks through business and social events.
To understand the importance of the body, it is necessary to appreciate the critical role the treasury function plays in a commercial bank’s daily and extended business cycle. Treasury is responsible for managing a bank’s daily cash flows and overall liquidity. In addition, it manages the bank's medium and long-term investments in interest rate products like government securities, short-term loans and deposits; foreign exchange risk management and efficient asset/liability management.
Due to the critical importance of the treasury function to the overall financial system, Bank of Uganda (BOU) requires all staff in commercial bank treasury departments to be certified by attaining the ACI dealing certificate.
Why is this necessary someone might ask? Well it is due to the fact that the actions and decisions of treasury staff not only impact the performance of the banks, but the overall economy. Here I am talking about the invaluable support they provide BOU and the finance ministry in implementing both monetary and fiscal policy to effectively manage the economy.
ACI members, within their respective banks, are at the forefront of helping the Government implement its fiscal policy as the main conduit through which Government borrows from the domestic market to help fund its budget deficit. They use their highly-specialised skills and knowledge to purchase and make markets in treasury bills, treasury bonds and other securities.
To put this into context, in 2017 alone, sh6.693 trillion worth of government securities was traded in the secondary market by bank dealers – all members of ACI, representing 55.2% of all outstanding stock. Stanbic Bank Uganda, where I work, accounted for over 30% of all secondary market volumes.
In addition, ACI dealers are also key partners in helping BOU implement its monetary policy. This is done by assisting BOU in sterilising the excess liquidity in the market through its open market operations (REPOs and Deposit Auctions). Roughly sh2 trillion is currently being mopped up via these monetary policy tools. Furthermore, ACI dealers are instrumental in supporting BOU with its national foreign currency reserves build up. BOU will occasionally have a need to buy dollars from the market and this is always facilitated by ACI dealers.
Lastly, ACI members act as trusted advisors who add value across several sectors by allowing businesses and entire industries to operate more cost effectively. For example, one of the things we do is advise our clients on forward looking trends within the forex and interest rate markets so they can effectively plan their cash flows, lock in exchange rates/interest rates, allowing them to remain profitable even during periods of high volatility.
Whilst the importance of ACI Uganda to the economy is little known, there is no doubt our members currently play a gargantuan role in the development of our financial markets and by extension helping the Government deliver on its national developmental agenda. Looking towards 2018 and beyond, ACI Uganda will continue to play this critical role.
This will be achieved through the regular training initiatives for our members, giving them the requisite skills and exposure to new products in this fast-changing environment. ACI Uganda will also continue to be the trusted partner to all its stakeholders, promoting initiatives that will further develop our capital markets and drive the growth of the economy.
The writer is chairman of ACI Uganda and fixed income trader, Stanbic Bank Uganda