(Business in Cameroon) - At the end of the subscription period on June 30, 2023, the number of bonds sold by Cameroon exceeded the XAF150 billion targeted by the country for its 2023 bond issue operation, reveals a source close to the matter. The source refused to disclose the exact amount raised by Cameroon during that operation.  "The result of the operation must first be validated by COSUMAF (the financial market oversight commission)," the source says.  

Before being made public, not only does the result need to be validated but Cameroon also needs to get the COSUMAF’s approval to keep the oversubscribed amount, informs internal sources at the Ministry of Finance. 

The request introduced by Cameroon to keep the oversubscribed amount is logical given that the country initially planned to raise XAF200 billion. That target was eventually revised downward due to market conditions, which became unfavorable following the tightened monetary policy introduced by the central bank (BEAC) to control inflation.  The oversight commission’s approval will allow Cameroon to get closer to its original target. 

A bought deal 

The success achieved by Cameroon despite a challenging environment comes as no surprise.  First, the group of arrangers (Financia Capital, Afriland Bourse & Investissement, Attijari Securities Central Africa, Société Générale Capital Securities Central Africa, and Upline Securities Central Africa) selected by Cameroon for this operation guaranteed a firm underwriting of XAF104 billion or 70% of the XAF150 billion target. Despite being the lowest underwriting ever guaranteed for Cameroon, it paved the way for the success of this operation. 

The second factor that contributed to the success is the coupon rates. Despite its prudential approach when it comes to interest rates and taking market conditions into account, Cameroon decided to raise the coupon rate (between 5.80% and 7.25%) to attract investors with bonds with various maturation periods (three to eight years, with grace periods of two to three years). This gave investors the choice to subscribe to long-term bonds with higher interest rates or short-term securities with lower coupon rates. 

The last fact that contributed to that success is the country’s rating (diversified and growing economy, debt ratio below the EU threshold, solvency, etc.), which makes investors confident in its securities. Minister Delegate for Finance Yaouba Abdoulaye emphasized that point on June 14, 2023, when the roadshow for the bond issue was being launched. 

Thanks to the proceeds from that issue, Cameroon will implement infrastructure projects.  According to the briefing note published for the operation,  more than XAF85 billion is earmarked for civil engineering works.  Another XAF20.5 billion is for water and energy projects, XAF15 billion for urban development, XAF14 billion for the transport sector, and XAF15 billion for the reconstruction of the North-West and South-West regions. With the target now exceeded, the country will likely add new projects or revise the budget allocated to some projects.

Brice R. Mbodiam