A combination of factors can explain this rise in rates. Ultimately, states borrow at higher costs, even though the financial sector fully benefits. This situation reignites the issue of borrowing constraints for African states.

Despite a slight decline, investors in the WAEMU (West African Economic and Monetary Union) money market continue to reap attractive returns on government-issued debt securities. As of the end of May 2024, the average rate for short-term Treasury bills was 7.33%, down from 7.99% in April but still higher than May 2023's 6.66%.

Treasury bonds followed a similar trend, with an average yield of 7.4% during the period, compared to 6.6% in May 2023. In the first quarter of 2024, investors earned CFA144.25 billion ($240.2 million) from CFA1,903.3 billion ($3.17 billion) loaned, up from CFA102.5 billion for a nearly identical amount in the first quarter of 2022.

Several factors contribute to the rising borrowing costs, including the central bank's interest rate hikes and insecurity in Sahel states seeking independence from regional organizations perceived as tied to France.

Yields on three-month loans, considered safer, nearly tripled from an average of 2.6% in Q1 2022 to 6.65% in Q1 2024. The high demand from states (CFA1,221.4 billion compared to CFA572 billion in 2022) likely drove up costs.

This situation sheds new light on the debate about African countries' borrowing capacity in local markets. While international agency ratings and demanded yields are often criticized, the high local rates, set by on-the-ground investors, suggest that establishing purely African rating agencies might not be the ultimate solution.