Government securities are loans to the government. They have been part of Ethiopia's financial system far longer than listed shares and can be a useful starting point for first-time investors. To assess one, you need to know how treasury bills and bonds work, how their returns are calculated and what risks remain. This article is general education, not advice on what to buy.
What government securities are
When the government needs to borrow, it can sell securities to the public and to financial institutions. You lend it money. It agrees to repay the amount on a set date and, in most cases, to pay you for the use of the money.
Government securities are usually considered less risky than shares because the borrower is the state and repayment is fixed in advance. They still carry risk from inflation, interest rates, access and the ability to sell early.
The main types
Treasury bills. These are short-term securities. In Ethiopia, the National Bank of Ethiopia (NBE) auctions treasury bills on behalf of the Ministry of Finance, and its auction page lists four maturities: 28 days, 91 days, 182 days and 364 days. A treasury bill pays no regular interest. You buy it at a discount to its face value and receive the full face value at maturity. The difference is your return.
Bonds. A bond is a longer-term loan, typically with interest paid at set intervals, known as the coupon, and the face value repaid at maturity. Public reporting on the Ethiopian Securities Exchange's launch of government securities in July 2025 concerned treasury bills, and we have not found confirmation that government bonds are listed there. Check what the government and the NBE currently offer before assuming bonds are available to you.
Other instruments. There can be other government-related instruments, issued by public bodies for particular purposes. Their terms differ, so read each prospectus or announcement.
How a treasury bill return works
A treasury bill is sold at a discount. Suppose its face value is 100,000 birr and it matures in 91 days. If you pay less than 100,000 now, the gain is the difference you receive at maturity.
The NBE states that auction yields are quoted on a discount basis. A discount rate is calculated on the face value, not on the amount you actually pay, so it is lower than the true return on your money. The two numbers are related but different, and this is a common source of confusion.
A return over 91 days cannot be compared directly with one over 364 days. Convert both to a yearly rate first.
The auction page of the NBE shows recent results. For example, its listing for the auction of 23 July 2025 gave weighted average yields of about 14.4 percent for the 91-day bill and about 15.0 percent for the 364-day bill. Those are dated results, not today's rates. Look at the latest results before drawing any conclusion.
How a bond works
A bond has a face value, a coupon rate and a maturity date. A bond with a face value of 100,000 birr and a coupon of 10 percent pays 10,000 birr a year, usually in installments, and returns 100,000 birr at maturity.
Bond prices change with market interest rates. If rates rise after you buy, newer bonds pay more and yours is worth less if you sell. If rates fall, your bond is worth more. Holding to maturity avoids that price risk because the face value is repaid in full, although your money remains tied up for the full term.
Who issues them, and how
The Ministry of Finance decides how much it needs to borrow. The NBE runs the primary-market auctions for treasury bills on the ministry's behalf. The NBE's auction page describes a competitive tender in which participants bid for amounts and yields, with results announced the same day and settlement following shortly afterwards. In 2025 an auction listing showed settlement the day after the auction, and the page now says participants submit bids through the central securities depository system. The ESX's material has stated that treasury bills are auctioned about every two weeks with a minimum investment of 5,000 birr in the primary market. Check these details on the NBE's page, because schedules and rules change.
The ESX listed treasury bills and began trading in them on 11 July 2025. This created a secondary market, where holders can buy and sell before maturity in electronic form, in addition to the primary auctions.
How individuals can buy
Public sources do not describe every step an individual must take to buy these securities, so confirm the process before investing.
Historically the primary market has been dominated by banks, pension funds and other institutions. Ministry of Finance bulletins show most holdings concentrated in a few large holders. ESX's launch material said that people who open an investor account through a licensed provider can take part in the secondary market for treasury bills.
Before investing, ask the NBE, the ESX or a licensed provider:
- Can an individual bid in the primary auction directly, or only through a bank or other licensed participant?
- What is the minimum amount, and how does it differ between the primary and secondary markets?
- Which providers can open an account for trading treasury bills, and what are their fees?
- Do residents, businesses and Ethiopians living abroad have the same access?
- Can you sell before maturity, at what price, and how quickly will you receive the money?
The risks
Inflation risk. If prices rise faster than your yield, your money buys less when you get it back. A yield of 14.5 percent with 12 percent inflation leaves about 2.2 percent of extra buying power. If inflation is higher than the yield, you lose purchasing power even though you are repaid in full.
Interest-rate risk. If rates rise after you buy, the market value of what you hold falls, which matters most for longer-term securities that you may need to sell early.
Liquidity risk. You can only sell early if there is a buyer. The secondary market is new, so check how much trading there is and what spread to expect. Our article on liquidity risk explains the idea.
Credit risk. The risk that the borrower does not repay is lower for a government than for most borrowers, but it is not zero, and it depends on the government's finances and policy.
Currency risk. If you live abroad or think in a foreign currency, the birr can change in value against it, which affects what you finally get.
Policy and rule risk. Tax rules, auction rules and access can change.
Government securities, deposits and shares
Deposits, government securities and shares serve different purposes.
| Option | What it offers | What to check |
|---|---|---|
| Bank deposits | Simple, widely available and usually easy to withdraw. Rates are set by banks. | How much your deposit is protected and how interest is taxed. |
| Government securities | A fixed return for a fixed period, set at auction. They can pay more than a deposit, but you may have less access and less flexibility. | Your money is usually tied up until maturity unless you can sell in the secondary market. |
| Shares | They can grow in value and pay dividends, but they can also lose value, and their prices move a lot. They are best for money you will not need for years. | Our guides on dividends and on analyzing a bank explain how to look at them. |
Many people use all three. They keep an emergency fund in deposits, put money for known future needs in fixed-term securities, and keep only long-term money in shares. What suits you depends on your goals, time horizon and tolerance for risk.
Tax
Why this matters for share investors
Government yields are the baseline against which risky investments are judged. If a treasury bill pays 14 percent with little risk, a share has to offer a convincing reason why it is worth more risk.
Interest rates affect banks. Many banks hold large amounts of government securities, and changes in yields affect their earnings and the value of their holdings. Our guide on analyzing an Ethiopian bank explains what to look for.
Common mistakes
- Comparing a discount rate with a deposit rate. They are quoted differently. Convert to a yield on the money you actually invest.
- Comparing different maturities without turning them into yearly rates.
- Ignoring inflation. Look at your return after inflation.
- Locking in money you may need. Check whether you can sell early and at what cost.
- Assuming government means no risk. The risks are lower but they exist.
- Sending money to an unlicensed seller. Check the licence first.
Keep a record
For each purchase, record the security, the date, the price you paid, the face value, the maturity date, the yield and where it is held. Check the maturity date and make a plan for the money before it arrives.