Finance

Treasury Bills: Net Returns Down for WAEMU Investors

Treasury Bills: Net Returns Down for WAEMU Investors
Monday, 14 September 2020 16:33

The Central Bank of West African States (BCEAO) reports an increase in the inflation rate within the West African Economic and Monetary Union (WAEMU). From -0.5% in December 2019, the inflation rose to +2.5% in July 2020, reflecting an accelerated and continuous rise in food prices over the first 7 months of 2020.

Rising prices may have certain advantages, particularly for the macroeconomy. Developed economies in Europe and America are now seeking inflation close to that of the WAEMU and even beyond; this, to achieve better financial sector balances. The Federal Reserve, the institution that serves as the central bank in the United States, has revised its inflation targets upward to restore the economy's strength.

But inflation has a bad side, especially in economies that are not sophisticated enough with financial products that can cover investors in difficult times. One of the consequences is that it weighs negatively on the net profitability of securities, whose yields are fixed interest rates.

With 12-month maturity bonds issued by WAEMU states, which yields a maximum of 5.2% interest, the net gain for investors if inflation remains at its July 2020 level is only 2.7%. But there are variations.

With inflation in Mali at only 0.6%, investors in this country who target the sub-regional money market realize the highest returns. Those who earn the least are investors from Niger, with less than 1% in net return. The inflation level there was 5.2%.

Inflation trends should be monitored in the WAEMU zone, particularly for food products. When prices rise in this segment, households have a greater need for income and this can weigh on business productivity.

For the time being, low prices in the WAEMU's main import markets still make it possible to contain a probable crisis.

Idriss Linge

On the same topic
Proparco commits $17.25 million to Alterra Africa Accelerator Fund Fund targets established African companies with expansion...
MobileMoney Fintech CEO says company may list within 3–5 years Listing would allow users to invest in the company via mobile channels Ghana’s stock...
Government begins third 100-day performance review on April 20, 2026 GDP growth projected to rise from 9.2% to 10.2% Industry, services and...
Fitch says debt restructuring could come before any new IMF program Public debt near 91% of GDP keeps pressure on finances LNG project fuels...
Most Read
01

(EBID) - EBID aims to allocate nearly 41% of its commitments to projects with environmental and...

EBID makes giant strides for a green transition in west africa
02

Mahindra & Mahindra is considering a CKD assembly plant near Durban to strengthen its presence i...

Mahindra & Mahindra Eyes Major Shift to Full Vehicle Assembly in South Africa
03

AFC disbursed €43 million for Côte d’Ivoire solar project Financing supports 66 MW pla...

AFC Backs First Green Project Finance Bond for 66MW Côte d’Ivoire Solar Plant
04

Operators review 2025 investments, outline 2026 expansion plans Consumer complaints persist...

Cameroon Presses Telecom Operators on Service Quality as Complaints Rise
05

MTN Ghana launches crackdown on mobile money agent fraud Audits trigger warnings, suspensions...

MTN Ghana tightens controls on mobile money agents over fraud concerns
Enter your email to receive our newsletter

Ecofin Agency provides daily coverage of nine key African economic sectors: public management, finance, telecoms, agribusiness, mining, energy, transport, communication, and education.
It also designs and manages specialized media, both online and print, for African institutions and publishers.

SALES & ADVERTISING

regie@agenceecofin.com 
Tél: +41 22 301 96 11 
Mob: +41 78 699 13 72


EDITORIAL
redaction@agenceecofin.com

More information
Team
Publisher

ECOFIN AGENCY

Mediamania Sarl
Rue du Léman, 6
1201 Geneva
Switzerland

 

Ecofin Agency is a sector-focused economic news agency, founded in December 2010. Its web platform was launched in June 2011. ©Mediamania.

 
 

Please publish modules in offcanvas position.