• Credit stress rose as NPLs hit 14.3% by Nov 2024, driven by BEAC's rate hike to 6.75%.

• Concentration in top banks (54% assets) holds 75% of bad loans, with deposits shifting to cash hoarding.

• A $550 million Eurobond and CFA131 billion loan offer relief for State Owned Enterprises' arrears, but refinancing risks loom.

Cameroon’s banking system ended 2024 with a paradox: most lenders met the regulatory standards, yet the quality of their loan portfolios worsened significantly. According to the African Development Bank’s Country Focus Report 2025 on Cameroon—published on 21 July—15 of the 19 banks and financial institutions operating in the country, or 78.9 per cent, fully complied with the prudential standards set by the Central African Banking Commission (COBAC). The AfDB describes this outcome as evidence of “a certain resilience of the banking system as a whole.”

However, this resilience is being tested by increasing credit stress. The report indicates that the gross non-performing-loan (NPL) ratio rose to 14.3 per cent at the end of November 2024, up from 13.4 per cent a year prior. Part of this rise is linked to the lingering effects of tighter monetary policy: the Bank of Central African States (BEAC) increased its key policy rate by 50 basis points in late 2023, raising the marginal lending facility to 6.75 per cent and increasing borrowers’ debt-service burdens.

Concentration risk worsens the situation. The five largest banks hold nearly 54 per cent of total assets and 60 per cent of customer deposits, yet they also account for nearly three-quarters of all doubtful and frozen loans. Meanwhile, the four remaining institutions that did not meet prudential standards manage roughly 22 per cent of system assets and operate with Tier-1 capital adequacy ratios close to the 7 per cent regulatory minimum.

Customer deposits still support the system, but their composition is shifting. Sight deposits—which represented 84.6 per cent of total deposits in November 2024—decreased by 6 per cent in real terms last year, while liquidity held at the regional central bank increased by 18 per cent. The AfDB interprets this as a sign that banks are hoarding cash instead of extending new credit, a trend that has slowed private-sector credit growth from 19 per cent of GDP in 2023 to a level projected only at 7.7 per cent in 2025. IMF estimates are, however, more positive, as the institution expects a 15 per cent increase in credit growth to the private sector at the end of 2025.

Despite these challenges, the AfDB concludes that capital and liquidity buffers remain sufficient, and no systemic threat is imminent. A new lifeline for the banks may now be emerging under IMF supervision. The authorities have secured a USD 550 million Eurobond and a CFAF 131 billion Afreximbank loan; the proceeds are being ring-fenced to settle overdue obligations owed by state-owned enterprises (SOEs) to domestic suppliers and banks.

SONARA, the national oil refinery, alone accounts for 83 per cent of SOE external debt and 68 per cent of SOE domestic debt as of end-September 2024. By settling these arrears, the government will inject much-needed local-currency liquidity into the banking system, reducing the amount of frozen loans and easing pressure on capital adequacy ratios.

However, this operation is not a permanent solution: Cameroon will need to refinance the new foreign-currency debt on commercial terms in the coming years, and future budgets should allocate resources for scheduled repayments. Additionally, a hidden issue concerning NPLs relates to currency-related capital funds obtained by some local banks from Development Finance Institutions to lend in specific sectors, which will need refinancing in the future.

Initially written by Brice Mbodiam

 Adapted and edited in English by Idriss Linge