Finance

WAEMU Money Market Offers High Returns Despite Slight Dip

WAEMU Money Market Offers High Returns Despite Slight Dip
Friday, 19 July 2024 17:48

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.

On the same topic
Ci Gaba VC Limited secures $34.9 million in its first close, targeting a final $90 million (1 billion GHS). The fund-of-funds invests in...
Cameroon, Congo, and Gabon seek new IMF programs after previous ones expired Regional bloc commits to sustaining reforms and rebuilding...
Program has supported about 50 women-led businesses since 2023 Nearly CFA7 billion mobilized combining financing and technical support New cohort of...
Proparco and RMBV take minority stake through $91 million capital increase Funds to support industrial expansion and West Africa growth Group...
Most Read
01

Firms move beyond payments toward integrated SME platforms Services include invoicing, inve...

African fintechs are moving beyond payments - and into business operations
02

The BCEAO now allows UEMOA citizens abroad to open CFA franc accounts under the same conditions as...

West Africa Targets Diaspora Funds With New Banking Access Rules
03

UBA UK, BII sign intent to expand trade finance in Africa Partnership targets funding gaps for in...

UBA, British International Investment explore Africa trade finance deal
04

Ghana to submit UN resolution on slave trade March 25 Draft seeks recognition as gravest crime ag...

Ghana pushes UN recognition of slave trade as crime against humanity
05

ECOWAS, Energy China discuss regional power infrastructure cooperation Talks cover $36.3...

ECOWAS, China Discuss Cooperation on West Africa Power Projects Under $36.39B Plan
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.