Capital Ethiopia Newspaper

Ethiopian community, Djibouti Port buy over million dollar dam bond

Ethiopians residing and working in neighboring Djibouti and the Port of Djibouti have purchased over one million dollars worth of Grand Ethiopian Renaissance Dam bonds.

When the Port reportedly purchased one million dollars worth bond, the community’s contribution exceeds over 300,000 dollars.

“The Ethiopian community and partners in Djibouti made the contribution towards the construction of the dam by buying over one million dollars worth of bonds and the handover was scheduled today,” Ambassador Dina Mufti, the Foreign Affairs Ministry spokesperson, told Capital on Thursday.

The latest contribution from the Diaspora in Djibouti appears to be the largest one to date. Meanwhile, the Ethiopian embassy in Washington D.C., the United States capital, has sold bonds worth USD 500,000 two months after launching the sale. In addition diplomats there have estimated a potential target above USD 1.5 million for the year.

Floated by the federal government for the financing of the Grand Renaissance Dam under construction on Nile River, the bonds are available for purchase in currencies of USD, Euros and Pounds Sterling for Ethiopians living aboard.

All Ethiopian nationals and foreign nationals of Ethiopian origin living and working outside Ethiopia can buy bonds as small as 50 dollars/ Euros/ pounds to support the financing of the dam.

The sale of bonds, being done in birr locally, aides the nation’s aspiration of covering the dam’s 76 billion birr costs on its own.

Ethiopian Embassies are busy promoting the purchase of bond for communities where they are stationed. According to diplomats the bond purchase offers a higher interest than any other saving schemes for the Diaspora.

“We are trying to explain to the Diaspora what benefits they get by buying the bond. The interest they will receive will benefit them in a way that would not happen anywhere else,” said Ambassador Girma Birru, Ethiopian Ambassador in the US and Mexico, in a Capital interview in December.

A bond that matures in five years will earn a yield square with the London Interbank Offered Rate (LIBOR) plus 1.25 percent of the total bond’s value. LIBOR is a competitive daily rate set for interbank lending (banks borrowing and lending to each other) using commercial paper. Repurchase agreements and similar instruments are usually benchmarked by the London monetary market.

National Bank guidelines for state bonds with a 6-7 year maturity date will enjoy LIBOR plus 1.5 percent; an 8-10 year old bond will have LIBOR plus two percent interest rates.

“The interest rate for saving here in the US or in the UK for example is below one percent, the interest the bond offers is significantly higher than that, it is a benefit that is not available for the Diaspora elsewhere,” explained Ambassador Girma.

With an estimated 500,000 Ethiopian Diaspora living in the US, the sale of the bonds there is one of the key regions the federal government is targeting for its bond sale.

Ethiopian communities in other countries are also being enticed by their embassies. Earlier this month Ethiopian Ambassador to Nigeria announced that Ethiopians residing in Lagos and Abuja, bought bonds with over 694,000 birr.

The government says some 13 percent of the construction of the Grand Renaissance Dam is expected to be completed at the end of this Ethiopian fiscal year which ends by July 8, 2012.

The dam being constructed will have the capacity to generate 6,000 Million Watts of electrical power; significantly above the estimated 5,250 MW first announced.

The dam, a reservoir at 63 billion cubic meters, or simply put twice as big as Lake Tana, would be located on the Blue Nile River about 25 Km east of Sudan in the Benishangul-Gumuz Region of Ethiopia.