On June 11, 2024, the BEAC put 120 billion FCFA into the banking circuit, a large amount but still not enough against requests that reached 292 billion FCFA in just one week. This trend was confirmed during the following weeks: with each injection operation, the needs expressed by the banks were largely higher than the amounts proposed by the central bank. For example, during the operation of July 2, 2024, the BEAC offered 165 billion FCFA, but the banks asked for 385 billion, ie a subscription rate of 233.33%.
This strong demand reflects the increasing reliance of banks on liquidity provided by the central bank. The ban on injections from February 2023 to June 2024 has left many banks in a delicate situation, where access to finance has become scarce. The rise in prime rates, coupled with a liquidity recovery policy, has severely limited the resources available to banks. So they welcomed the resumption of liquidity injection with relief. The confirmation, after the operation of June 11, the BEAC made another 12 for a cumulative amount of more than 2,100 billion FCFA, and all these offers received a subscription rate well above 100%. The latest, an offer of 250 billion FCFA on September 3 that received a subscription rate of 169.20%, the needs expressed by the banks reached 423 billion FCFA.
The effects of tight monetary policy
According to analyzes by financial experts, one of the reasons why banks have become so dependent on BEAC’s liquidity is in the monetary context of the region. From the end of 2021, the central bank has tightened its monetary policy to fight inflation. This policy led to an increase in prime rates, limiting access to credit for banks. At the same time, the BEAC has intensified its liquidity recovery work, draining money from bank archives through the issuance of BEAC bonds. The cost of credit has become prohibitive, both for States and for economic operators and families. Given this situation, banks must rely on rare liquidity injection opportunities to maintain their operations and meet the growing demand for credit in the sector.
Another explanation for this growing dependency is linked to the increase in refinancing needs. According to BEAC, the increase in requests from credit institutions to the intervention department of the Central Bank is the result of several factors, including the need to refinance assets that have become more expensive in -money squeeze text. Banks in the region must also face an increase in bad debts, due to an economy weakened by the Covid-19 pandemic and regional conflicts.
This situation leaves banks more vulnerable, forcing them to actively seek sources of liquidity to maintain their solvency. The BEAC injection, although limited, represents a breath of fresh air for credit institutions, allowing them to refinance their operations at conditions that are very advantageous compared to market conditions.
Inflation is challenging BEAC’s measures
However, despite this injection of liquidity, the economic situation in the CEMAC zone is still a cause for concern, especially in terms of inflation. For example, in Cameroon, inflation reached 6.3% between April 2023 and April 2024, far beyond the 3% limit required in the CEMAC zone. This persistent inflation raises the question of the effectiveness of the central bank’s monetary tightening measures, and at the same time shows the difficulty in balancing the funding needs of banks with the goals of macroeconomic stability.
