NBS Bank plc has issued a K7 billion Roads Bond Facility with the Roads Fund Administration (RFA) to finance the rehabilitation and construction of a road in Lilongwe.
The bond—a debt investment in which an investor loans money to an entity—has been issued by the Malawi Stock Exchange (MSE)-listed bank in collaboration with its sister company, Nico Asset Managers.
The facility will be repaid over five years using the fuel levy which is managed by RFA and is payable by coupons at the 91-day Treasury bill (T-bills rate plus 1.75 percent interest per annum.
To be constructed by Mota-Engil, a Portuguese industrial and construction conglomerate, the 4.4 kilometres dual carriage way will start from Area 49 to Parliament Building.
Speaking at the signing of the agreement in Lilongwe on Tuesday, Secretary to the Treasury Ben Botolo said government is aware of the ever increasing demand for resources for road maintenance and related road activities which are not being adequately met by the current revenues of the RFA.
He said: “We normally fund the road construction projects through development partners. Raising capital in Malawi is quite a challenge, but we have seen that NBS Bank through other subsidiaries have managed to raise K7 billion at a very competitive price to finance this road.”
“NBS Bank and Nico Asset Managers are sitting on huge idle resources mainly pension funds. We are using the idle resources elsewhere where they can generate economic activity.”
In his remarks, NBS Bank board chairperson Vizenge Kumwenda said the bank will offer the bond at competitive rates to ensure that RFA minimises its funding costs while the bank covers its operating margin.
“For the bank to emerge the financier, we had to bid together with other banks and the institution with the competitive bid emerged successful.
“For that to happen, it is not just a matter of looking at how much money NBS Bank will make, but also what is acceptable by the customer,” he said.
Government changed the fuel pricing regime to automatic pricing based on a set formula and also changed the policy on fuel levy from a fixed rate per litre to a percentage of the landed costs.
The bond facility is the first of its kind in Malawi to be issued by a company.
NBS Bank and Nico Asset Managers are subsidiaries of Nico Holdings Limited.