(Business in Cameroon) - CEMAC countries raised XAF849.5 billion on the BEAC debt market in Q2-2020. This represents a 27.2% rise quarter-over-quarter. This is revealed in the June 2020 edition of the BEAC’s market bulletin.

The significant rise was not the only interesting fact. Indeed, the unprecedented fact during that quarter was the volume of long-term securities issued by member countries. According to the bulletin, the volume of long-term securities exceeded short-term securities for the first time since the market was launched in November 2011. Overall long-term securities represented 53.6% of total issuances during the period.

The BEAC explains that this rise in the volume of long-term securities issued by countries was due to the coronavirus pandemic and the drop in national revenues.

Credible sources indicate that Cameroon was the first country to issue such securities in the market during the period. Indeed during the quarter under review (Q2-2020), the Cameroonian government successfully carried out a T-bonds issuance program aimed at raising XAF220 billion for various investment programs. It finally raised XAF219.4 billion by issuing 2,3,5,7 and 10-year bonds. Following its footsteps, other CEMAC countries like Congo entered the segment in search of long-term financing.

 Longer maturity period

The reason Cameroon and other CEMAC countries shifted their focus to long-term securities (instead of short-term securities they were preferring) is that they have some notable advantages.

"The money market is the traditional market on which treasuries and banks issue T-bonds, whose average loan terms are longer than bonds’ (on the financial market, editor's note). T-bonds provide a longer grace period for the government, as the principal is not repaid until the end of its maturity, unlike bonds, which are usually repaid in quarters from the second year onwards," explains Samuel Tela, Director of Treasury at the Treasury General Directorate of the Ministry of Finance.

He adds that the organization of operations involving longer-term securities is less constraining in terms of execution time. "Within a maximum period of 45 days, all incentive, sensitization, communication and subscription actions can be completed, unlike the short-term securities which take on average 6 to 8 months to complete," an internal note from the Ministry of Finance, accessed by Business in Cameroon, corroborates.

Highly competitive costs

Beyond the flexibility it allows investors, the capital market is more competitive than the money market in terms of service costs. According to internal sources at the Cameroonian directorate general of the treasury, the treasury usually saves about 2% of funds raised in Capital markets.  

All these advantages made CEMAC countries choose long-term financings in the capital market over the short-term in the money market.

According to the BEAC, this preference for long-term securities changed the structure of countries’ debt portfolio in the public securities market. It is now constituted, at 58.3%, of long-term securities. Within 12 months, the volume of outstanding long-term securities doubled from XAF763.9 billion at the end of June 2019 to XAF1,513.4 billion on June 30, 2020. As for short-term securities, they rose by only 14.9% during the 12 months (XAF940.5 billion to XAF1,080.3 billion).

Brice R. Mbodiam & Sylvain Andzongo