(Business in Cameroon) - Between November 2020, when the BEAC effectively started buying public securities back, and May 2021, the volume of public securities issued by CEMAC countries in the regional market to raise funding rose by XAF925.3 billion, according to a recent research paper published by the Central Bank.
According to the central bank, during the period under review, CEMAC countries captured XAF215.6 billion through this securities buyback program, representing a little over one-third of the XAF600 billion the BEAC dedicated to the program. With XAF77.7 billion, Gabon benefited the most from the program followed by Chad (XAF62.9 billion), Congo (XAF61.8 billion), and Cameroon (XAF13.2 billion).
"The buyback program contributed 23.3% of the resources raised by CEMAC states on the market," comments Ivan Bacale Ebe Molina, BEAC’s director-general of studies, finance, and international relations
An unpopular operation
The said program was launched on September 1, 2020, and renewed for 6 months in March 2021. It was initiated by the central bank BEAC to curb the impacts of the coronavirus pandemic and its aim was to inject up to XAF600 billion into public treasuries, at the rate of XAF100 billion per member country. To benefit from those resources, countries had to meet certain criteria. For instance, the concerned securities should be long-term but the maturity period should not exceed 10 years. Also, the subscriptions to it should have been at least 50% and the volume of offers rejected should not exceed 5% of the subscriptions from primary dealers. Also, the requesting country must prove that at least three primary dealers participated in the operation.
The program involves the BEAC buying the remaining eligible securities when the offers do not meet the issuing country’s target. Specifically, the BEAC will negotiate with the primary dealers that participated in the concerned security issuance operation offering them to immediately buy back their securities if they subscribe to the remaining bonds at the average weighted interest rates secured during the operation.
However, the program did not attract many market professionals, who deem it overly complex. During the period under review, although it helped boost the financial resources of some public treasuries, the volume of securities bought back by the BEAC in the secondary market was only 5.7% of the overall securities issued by member countries in the primary market.
"Instead of this rather complicated process, the BEAC should have simply bought back the securities owned by primary dealers at attractive rates to provide them with liquidity thanks to which they will be able to subscribe to the various issuance operations organized by member countries. Nevertheless, their program allowed countries deemed risky to obtain the amounts they were sourcing in the market. This is why some people think that they [the central bank] initiated such a mechanism to help some specific countries, which are usually unable to raise the funds needed on the local money market [ed. note: the Central African Republic, Chad and Equatorial Guinea to some extent], " a market professional claims.
Brice R. Mbodiam