(Business in Cameroon) - Cameroon is seeking CFA200 billion on the regional stock market BVMAC. The information was reported in a request for proposals issued last March 25 by the Cameroonian Minister of Finance, Louis Paul Motazé.

This fundraising, expected to be completed in H2 2022, comes three years after the country’s last operation on the market. Instead of the usual 5-year bonds that Cameroon is used to issuing, the country is now eyeing 7-year bonds, including a 2-year grace period. This means that the government will begin repaying the loan in 2024 and complete repayment in 2029.

No details are given on the interest rate, but given the type of bond, Cameroon will surely make it higher than its usual 5.5-5.6%. According to Samuel Tela, Director of Treasury at the Ministry of Finance's General Directorate of the Treasury, this new fundraising will help diversify the state’s sources of financing. “The bond issue offers the chance for a large public to participate in financing the state,” he said. Samuel Tela made this comment after some experts reported that Cameroon was more motivated to help redevelop the market than to reap the financial benefits that such an operation would bring.

Many financial experts, including those from the Ministry of Finance, believe that the CEMAC stock market is more expensive, less flexible with longer transaction times than Beac's public securities market. This explains why many CEMAC countries, including Cameroon, have resorted to the public securities market for their mid and long-term borrowing in recent years.

According to the Finance Ministry, beyond boosting the regional market, Cameroon’s new operation is to thwart the overload now observed in the public securities market. Because of the lack of a strong dynamic in the secondary securities market, banks that operate as intermediaries (primary dealers) in the primary market find it difficult to issue debt securities held in their name. Banks hold about 79% of all securities issued by Cameroon on this market (an outstanding amount of nearly CFA1,200 billion at the end of November 2021), compared to just over 20% for institutional investors. The share held by individuals is almost zero. As a result, with an overweight equity portfolio, coupled with the pressure to comply with prudential ratios, it is not certain that the primary dealers will be able to provide the Cameroonian Treasury with the CFA350 billion to be raised via public securities, as authorized by the 2022 finance law. The “hybrid” strategy, which consists of using both the financial market (CFA200 billion) and the Beac public securities market (CFA150 billion), therefore, comes as a solution.

Brice R. Mbodiam