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CEMAC: Cameroon to raise XAF225 bln on the public securities market in H1-2021

CEMAC: Cameroon to raise XAF225 bln on the public securities market in H1-2021
  • Comments   -   Wednesday, 24 February 2021 02:37

(Business in Cameroon) - The Cameroonian public treasury plans to raise XAF225 billion on the BEAC public securities market via the issuance of long-term securities in H1-2021. According to the official release published by the Directorate General of the Treasury, the funds will be raised through a series of 5 to 10-year maturity securities.

The country will open this long-term financing operation on February 24, 2021, with the issuance of 5-year bonds. With these bonds backed by a 5.5% interest rate, the government hopes to raise XAF50 billion in the said market.  

Two new operations are scheduled for March 2021. The first will be carried out on March 10 and the second on March 24. During the first operation, the country will issue 7-year bonds backed by a 7% interest rate in a bid to raise XAF35 billion. For the second operation, the country will seek XAF40 billion via issuance of 5-year bonds backed by a 5.5% interest rate.

Overall, the country Plans to raise XAF125 billion on the BEAC public securities markets by issuing long-term securities in Q1-2021. In the second quarter, the country targets XAF100 billion via issuance of the same type of securities, making a total of XAF225 billion for the current semester.  

Specifically, between April and June 2021, in addition to 5-year bonds (backed by a 5.5% interest rate) issued to raise XAF30 billion, the Cameroonian Treasury will issue 10-year bonds (on May 5, 2021). The interest rate for that operation is 7% and through it, the government intends to raise XAF25 billion. The last operation for the semester is scheduled for June 30, 2021. During the operation, the country will seek XAF45 billion by issuing 6-year bonds backed by a 5.8% interest rate.

Competition from Gabon and Congo’s securities  

To encourage investors in the CEMAC zone to participate in this fund-raising program, the General Directorate of the Treasury published a prospectus indicating the various advantages of public securities investments. "Negotiable public debt securities or fungible Treasury bonds are remunerated with an interest rate higher than the rate offered for traditional savings. They are tax-exempt, guaranteed by the state. Therefore, there is no defaulting risk. They are also liquid and as such easy to convert into cash via sale or refinancing before maturity," the marketing document states.  

On the sub-regional public securities market, Cameroon is the main animator of the long-term borrowing segment with XAF150 billion and 219.4 billion raised on the market in 2019 and 2020 respectively. It even has the confidence of investors active on the market. Thanks to a cautious interest rate policy, Cameroon is even the country to obtain the cheapest loans in public securities markets in Sub-saharan Africa.

However, this year, its task will not be easy because of the competition for long-term loans from Gabon (XAF885 billion to be raised on this market in 2021) and Congo on the public securities market. Despite the higher risk they represent compared to Cameroon (according to some analysts), these two countries are backing their operations with higher interest rates. For instance, in December 2020, while the Cameroonian 5-year bonds were backed by a 5.96% interest rate (according to data from the central bank BEAC), the same type of securities issued by Gabon and Congo were respectively backed by over 11 and 10% interest rates. At the same time, since the beginning of the 2021 financial year, Gabon has been backing its 2-year treasury bonds. However, since 2020, the interest on Cameroon’s treasury bonds are averaging 5.5% on 5-year bonds, 6% for 7-year bonds, and 7% for 10-year bonds.

The higher interest rates offered by those neighboring countries are therefore likely to entice some investors.

Brice R. Mbodiam

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