(Business in Cameroon) - During its liquidity injection operation of January 26, 2021, the Bank of Central African States (Beac) injected XAF193 billion into banks operating in the CEMAC region, official sources indicate. This is tremendously higher than the weekly XAF30 to 80 billion liquidity captured by the same banks throughout 2020. It is also similar to the trend developing since the beginning of the 2021 fiscal year because the volume of liquidity subscribed to weekly by those banks, from early January 2020 to now, exceeds XAF100 billion.
Specifically, during the January 5, 2021 operation, the banks captured XAF123 billion of liquidity, XAF131 billion on January 12, and XAF143 billion on January 19. The aggregate of the overall liquidity they captured in January 2021 is XAF590 billion.
As a banker explains, "banks solicit liquidity when their needs are greater than its usual consumption." This rise in CEMAC banks’ liquidity needs can be explained by the gradual recovery of economic activities despite the risks of a second wave of the coronavirus pandemic, which seriously affected CEMAC economies (and almost the whole world in that instance) in 2020.
The Money market
These commercial banks’ renewed interest 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 those banks operate as primary dealers on the money market where those treasuries are planning major fundraising operations.
In that market, Gabon plans to raise XAF885 billion this year and Cameroon XAF350 billion. This equals XAF1,150 billion for the two countries, which issue the most public securities on the market.
Banks’ interest in the BEAC’s liquidity this month could also result from their desire 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 defaults each year. Also, government securities are not only tradable 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