The Cameroon Treasury has announced plans to launch a new bond issue on the BVMAC regional financial market to raise FCFA200 billion. This will be the most expensive operation since December 2010, we learnt.
Initially scheduled for May 2023, the fundraising may be delayed by a few weeks at the request of market intermediaries. Sources revealed that this postponement was requested due to a lack of agreement between the government and the consortium of arrangers, specifically regarding interest rates.
The arrangers selected for the fundraiser include Afriland Bourse & Investissement, Société Générale Capital Securities Central Africa, Attijari Securities Central Africa, Upline Securities Central Africa, and Financia Capital. It has, however, been reported that the government has now agreed to raise the interest rate it usually offers on the market.
Indeed, since its first bond issue in December 2010, Cameroon has always offered interest rates ranging from 5.5% to 6.25%, making the country the borrower with the lowest rates on the financial market. This time, under pressure from intermediaries and the current market conditions, Cameroon is expected to offer investors between 7% and 10%, we learnt. To better bear these higher interest rates, Cameroon plans to launch a public offering with multiple interest rates this year, meaning investors can subscribe to both shorter maturities with lower interest rates (7% for 6 years for example) and longer maturities with much higher interest rates (9.5% for 10 years for example).
The whole situation was the result of the restrictive monetary policy implemented by the Bank of Central African States (BEAC) to limit access to credit and fight growing inflation in the CEMAC. Since February 21, 2023, Beac has suspended its weekly liquidity injection operations and is instead stepping up withdrawals (twice a week) from the coffers of banks operating as Primary Dealers (SVT) on the market.
Additionally, BEAC’s Monetary Policy Committee has raised its key rates for the fourth time since December 2021 to curb inflation, which is projected at 6.4% in 2023. This is aimed at reducing bank liquidity and making it more expensive for economic agents, including governments. Another factor is the excessive size of credit institutions’ securities portfolios, resulting from their high activity on the money market. This trend has led to a reduction in bank liquidity, causing financing to become restricted and only available to those willing to pay the highest interest rates, per the principles of supply and demand.
Brice R. Mbodiam