(Business in Cameroon) – During its liquidity injection operation on January 26, 2021, the Bank of Central African States (Beac) injected FCFA 193 billion into banks operating in the CEMAC region, sources indicate official. This is considerably higher than the XAF 30-80 billion weekly liquidity captured by the same banks throughout 2020. It is also similar to the trend that has been developing since the start of fiscal 2021 as the volume of liquidity subscribed each week by these banks, from the beginning of January 2020 to today, exceeds XAF 100 billion.
Specifically, in the January 5, 2021 transaction, banks captured XAF 123 billion in cash, XAF 131 billion on January 12, and XAF 143 billion on January 19. The total aggregate cash they captured in January 2021 is XAF 590 billion.
As one banker explains, “banks request liquidity when their needs are greater than their usual consumption.“This increase in the liquidity needs of CEMAC banks is explained by the gradual resumption of economic activities despite the risks of a second wave of the coronavirus pandemic, which seriously affected the economies of CEMAC (and almost all in this case) in 2020.
The renewed interest of these commercial banks in the liquidity provided by the BEAC bodes well for companies seeking funds to recover from the economic impacts of the coronavirus pandemic. It also bodes well for public treasuries since these banks operate as primary dealers in the money market where these treasuries are planning major fundraising operations.
On this market, Gabon plans to raise 885 billion FCFA this year and Cameroon 350 billion FCFA. This is equivalent to 1150 billion FCFA for the two countries, which issue the most public securities on the market.
The banks’ interest in BEAC liquidity this month could also stem from their willingness to play a leading role in the money market this year. Indeed, unlike corporate bonds and personal loans, money market activities are less risky. Borrowing governments have virtually no default every year. In addition, government securities are not only negotiable on the secondary market, but are also eligible for refinancing by the Central Bank. They therefore offer more repayment guarantees to banks than loans to businesses and other individuals.
Brice R. Mbodiam