ARTICLE AD BOX
(Business in Cameroon) - The Cameroonian Treasury issued last week 26-week fungible Treasury bills (BTAs), seeking CFA25 billion on the Beac public securities market.
This operation is another attempt after three mixed performances since the beginning of the year. The latest happened two weeks ago when the Treasury obtained only CFA10 billion on two issues by auction, including 26-week BTAs and 3-year Treasury bonds (OTAs). It was seeking CFA10 billion and CFA30 billion respectively on both types of securities. On March 6, the country made an OTA issue and only obtained 50% of the amount sought. Another mixed performance occurred on March 13 when the country raised CFA5 billion out of CFA15 billion sought.
The reasons behind this situation, market experts say, lie in the fact that banks now require higher interest rates. In January 2023, for example, the average cost of BTAs subscribed by the country was 4.39%, compared with 2.94% in the same period in 2021. Yet Cameroon is a benchmark debt issuer in the CEMAC and has not recorded a single default since it began operations.
A consequence of the monetary policy
This investor demand is coupled with the tightening of the Central Bank's monetary policy. Since February 21, Beac has suspended its weekly liquidity injection operations. In the same vein, Beac's Monetary Policy Committee decided on March 27 to raise its key rates for the fourth time since December 2021 to curb inflation, which is projected at 6.4% this year. The Tender Interest Rate (TIAO) was raised from 4.5% to 5%, while the rate on the marginal lending facility was increased from 6.25% to 6.75%. These decisions aim to reduce liquidity by making it more expensive for economic agents (including governments).
The other explanation for this tightening of financing conditions on Beac's government securities market is the excessive concentration by commercial banks of securities issued by governments. The banks can directly access the primary market and buy these securities. But according to their specifications, they are obliged to sell at least 30% of their securities portfolio on the secondary market, where non-bank players have access. However, they sell the securities to each other and barely involve non-bank players. At the end of January 2023, banks accounted for 77.7% of outstanding government debt, compared to only 2.2% for individuals and 15.3% for institutional investors (pension funds, insurance companies, etc.).
Let’s note that the Cameroonian Treasury plans to raise a total of CFA450 billion over the year. But questions remain given the mixed performance observed since the beginning of the year.
Cédrick Jiongo
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