The monetray policy committte decided to keep its key rate unchanged to 3.5%.
The monetary policy committte decided to maintain its key rate unchanged to 3.5%.
The monetary policy committee decided to keep its key rate unchanged to 3.5%.
The monetary policy committee has decided to maintain its key rate to 3.5%.
Debt vs GDP / Bonds vs bills
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All Data - Benin
|GDP (billions US$)||3.76||3.90||4.18||4.18||-||-|
|Total Outstanding Amount (Billion US$)||0.28||0.41||0.69||-||-||-|
|Outstanding Amount/GDP (%)||7.58%||10.59%||16.45%||0.00%||-||-|
After having risen from 3.5% in 2011 to 5.4% in 2012, real gross domestic product (GDP) growth is estimated to have been secured at 5.0% in 2013, confirming a trend towards recovery. Economic activity has been fuelled in particular by: i) an increase in agricultural production due both to incentives to farmers and to the reinforcement of the regulatory framework for agricultural production and the distribution of inputs; and ii) an increase in port traffic following port modernisation measures. The impact of growth on poverty reduction remains, however, insufficient. Inflation, estimated at 2.6% in 2013, returned below the 3.0% threshold set by the West African Economic and Monetary Union (WAEMU) after having been exceptionally high in 2012 (6.6%) because of Nigeria’s reduction in subsidies of fuel prices. Growth is projected at 4.9% in 2014 and 5.3% in 2015 thanks to the vigour of the agricultural and the port sectors and to the entry into production of a new cement plant and a number of agricultural processing units.
Macroeconomic stability should be strengthened by the ongoing reforms, particularly in the agricultural and port sectors and in public finances. It is, however, crucial to develop, in consultation with all the stakeholders, a clear strategy to achieve sustainable management of the cotton sector in order to ensure its maximum profitability; the sector provides a source of income for one-third of the population. To support growth in Benin and reduce poverty incidence, there are also major stakes in developing the private sector, which is largely dominated by the informal sector. In this respect, in addition to ongoing efforts to make the business climate better and facilitate access to funding, public-private sector dialogue should be improved and investor confidence strengthened by implementing the recommendations of the round table on the development of the private sector held in October 2012.
The private sector is in fact in a good position to exploit the country’s potential, notably agricultural, to the full, and its development is essential for Benin’s integration into global value chains (GVCs). Although GVCs are embryonic in the country, certain activity sectors could be integrated into them, provided they are structured through appropriate policies. These include in particular: the cotton-textile industry, with market opportunities in West Africa; the cashew-nut, maize, rice and pineapple subsectors; tourism, with the development of tourist areas based on public-private partnerships (PPPs); and transport, with the establishment of a multi-modal hub to optimise the country’s position as a trade corridor (modernisation of the port of Cotonou with dry ports, construction of the Glo-Djigbe airport, Cotonou-Niamey railway).
The state of Benin is one of the eight members of the West African Economic and Monetary Union (WAEMU). These eight states have a common Central Bank (BCEAO).
The regional debt market provide to the states of the WAEMU an alternative source to cover their financing needs, instead of direct monetary assistance from the BCEAO to national treasuries.
There is a common banking sector in the WAEMU. There are 119 accredited credit institutions on which 102 banks. In Benin, there are 12 banks with a total assets of XOF 2161 billion which is 12,4% of the total assets of all the banks in region.. The banking activity is characterized high interest rates and conservative lending process. Therefore, few firms have access to credit.
The other source of financing is the West African Regional Stock Exchange (BRVM). The market capitalization at end of 2014 was XOF 7 458 billion of which XOF 1 139 billion for the bond compartment. Bonds issuing by the States of WAEMU are traded at the BRVM.
Source: African Economic Outlook
Monetary policy & Public debt
Benin as WAEMU member has no sovereignty over the monetary policy decisions. Decisions are taken by the BCEAO in accordance with all members. The main role of the BCEAO is the price stability.
The Conference of Heads of State is the supreme authority of the Union. She decides on the accession of new members, and takes all decisions on matters submitted to it by the Council of Ministers.
The Council of Ministers sets monetary policy and credit of the Union to safeguard the value of the currency and to fund activity and economic development of the states of the Union. It approves such netting agreements and payments between the central bank and foreign issuing institutions intended to facilitate external paymentsn of the Union's states.
In the WAEMU zone, the debt to GDP ratio must stay under 70%.
In Benin, the domestic debt to GDP ratio is 9,21% at end of 2012 and the external debt to GDP ratio is 17,07%.
Instruments issued and Market participants
Treasury Bills (T-Bills): Maturities available 7 days, 1 month, 3months, 7 months, 1-year and 2-year.
Treasury Bonds (T-Bonds): Maturities available are greater than 2 years but don’t exceed 7 years.
The nominal value of treasury bills is set at XOF 1 million or a multiple of this amount. The nominal value of Treasury bonds XOF 10 000 or a multiple of this amount.
T-bills are dematerialized and held in current account in the books of the Central Bank. While T-bonds are dematerialized and held in current account in the books of the central depositary.
Each State under the responsibility of the Ministry of Finance, issues T-bills and T-bonds.
The Central Bank of the States of West Africa (BCEAO) provides, on behalf of the Treasuries, the material organization of auctions.
West African Development Bank (BOAD) issues bonds to finance the development projects in the WAEMU zone.
Banks and the financial institutions are main actors in the purchase and repurchase of Treasury securities.
Primary & Secondary Market
Benin has issued for XOF 246 billion in 2012. The 2012 issuances have been exclusively on T-Bills instruments.
In the WAEMU zone, the outstanding of the new issuances decreased by 8,5% to XOF 1 545 billion in 2012 from to XOF 1 689,7 billion in 2011. T-bills, represent 52,2% of the total issuances. The average interest rate of the T-Bills issuances was 5,15% in 2012.
The total debt’s outstanding of the WAEMU zone, amounted XOF 3 023,9 billion at end of 2012. It increased by 14% compared to 2011. The total debt outstanding represents 7,6% of the GDP of the WAEMU zone.
For the year 2013, the expectations are to raise XOF 1 961 billion, an increase of 26,9% compared to 2012. The share of T-Bills will be around 57%. The total debt outstanding is estimated at end of 2013 at XOF 3 261 billion.
T-Bills are traded OTC. The secondary market is not liquid because of the buy & hold strategy commonly used.
T-Bonds are traded at the Regional Bond Exchange (BRVM) but it can also be traded OTC. There are 34 quoted lines at the BRVM. There are 10 bonds issued by the countries directly and 3 bonds by the BOAD. The rest of the bonds are belonged by state companies or institutions.
The state of Benin has 2 bonds of 5-year maturity quoted at the BRVM.
At end of December 2012, the market capitalization of quoted bonds at the BRVM was equal to XOF 831,8 billion. The average of bond traded by day is equal to 1, which demonstrates the illiquidity of the secondary market.
The yield curve is inexistent in reason of the absence of maturities greater than 7 years.
Clearing, Settlement and Custody
Payments for purchases of treasury bills by subscribers is done by debiting their ordinary current account with the Central Bank, at the value date defined before the issuance of such bonds. Purchasers must take all steps to ensure that these accounts are adequately supplied to ensure the settlement of Treasury allocated to them for their own account or on behalf of their clients.
The day after the settlement, all account holders receive a statement of their securities account, confirming the movements and balances out the latest. A value date of the issuance of Treasury bonds, the proceeds of sales deductions, net of discount paper is credited to the ordinary current account of the National Treasury transmitter opened in the books of the BCEAO.
On the secondary market, the Central Bank clears transactions between stakeholders with an account "Treasury" and a regular checking account in his books. Compensation is organized according to the principle of double reporting, the aim being to ensure the outcome of the simultaneous delivery of Treasury bills and cash settlement. Thus, for a given transaction, each Contracting Party shall notify the Central Bank, stating the main characteristics of the transaction.
The Central Depository (DC/BR) is responsible for the preservation and circulation of securities on behalf of issuers and financial intermediaries approved by the Regional Council for Public Savings and Financial Markets (CREPMF). It acts as settlement bank and may hold cash accounts negotiators.
It performs the following tasks:
- Centralization conservation securities accounts on behalf of its members;
- Regulation and delivery of stock exchange transactions, arranging for each Management Company and Intermediation (SGI), the compensation value by value between securities bought and sold;
- Settlement of the balances arising from compensation relating to market transactions and payment products (interest, dividends, etc.) attached to the holding of securities;
The headquarter of the DC / BR is in Abidjan. It is represented in each Member State by a national antenna of the Stock Exchange.
Protection of investors
The Regional Council for Public Savings and Financial Markets (CREPMF) is the regulatory body of the WAEMU. It’s mission is to protect savings invested in securities, financial products traded on the BRVM and other investment needed savings.
To achieve the aims related to its mission, the CREPMF has the regulatory authorities, decision-making, monitoring, investigation and sanctions.
The DC/BR provides actuation of the Guarantee Fund in the event of a participant default.
Guide to Buying Bonds
Procedures for market participation
The frequency of auctions is determined by the states, together with the Central Bank. Each state cannot hold T-Bills and Government bonds auction more than once a week.
For Treasury Bills, a calendar program specifying the instruments and their amounts and maturities, is published quarterly by the Minister of Finance in consultation with the Central Bank, and in consideration mainly the foreseeable revenue and government spending. Whereas Treasury bonds, an indicative issuance calendar specifying the instruments and their amounts and maturities, is set annually by the Minister of Finance in consultation with the Central Bank.
Each issuance should be advertised at least 7 days before the auction by describing the issuance characteristics. Bidders submit to the Central Bank, sealed in a ballot box reserved for this purpose, a submission form specifying the amounts and the interest rates or the price offered. Submissions may also be made electronically in the conditions defined by the Central Bank.
Later than one hour after the deadline for bids submission, the National Directions of the BCEAO transmit electronically, by fax or any other means of rapid communication accepted by the Central Bank, the main submissions to the principal agency of the BCEAO, which is organizing the auction.
Treasury bills are eligible for refinancing by the Central Bank. Investors and the Central Bank may buy or sell Treasury bonds on the secondary market, awarded by private treaty. In this context, they are required to post the purchase price and sale which they are willing to transact.
Treasury bonds can be traded on the secondary market. As such, they can be exchanged at the Regional Stock Exchange (BRVM) or outside the BRVM.
The settlement date is T+1 for domestic operations and T+3 for operations between Members of the Union. This period can be modified by BCEAO. However, the contracting parties are free to agree on a minimum term above to unwind their operations. If the instructions given by the two parties are identical, the operation is definitely offset the value date agreed. In case of discrepancy between the evidences, the Central Bank suspends the transaction and notifies this decision to both parties for correction. Central Bank ensures the existence of adequate provisions before executing the compensation requested. Transmission to the Central Bank of notifications occurs in the selection of speakers, fax, telex, ordinary mail or any other means of rapid communication accepted by the BCEAO.
Treasury bills and Treasury bonds incomes are tax-free throughout the territory of the Member States of the WAEMU. But for non-members, the tax rates are different from one country to another. In Benin, the tax rate one securities income is equal to maximum 6%.
|Fitch||No rating||No outlook|
|Standard and Poor’s||No rating||No outlook|
There is no appropriate Primary Dealers System in the WAEMU zone.
Subscription of Treasury bills is reserved to banks, financial institutions as well as regional financial institutions with an ordinary current account in the books of the Central Bank. Other investors, physical or legal persons, whatever their country of origin can also purchase Treasury bills in the primary market through banks located in the territory of the Union.
The primary subscription of Treasury bonds is restricted to banks, financial institutions, regional organizations and financial management company and intermediation (IMS). Other investors, physical or legal persons, whatever their country of origin may also purchase Treasury bonds on the primary market through banks and brokerage firms (SGI) located on the territory of the Union.
Openness to international investors
The members of the zone are actively encouraging foreign investment. Foreign companies are free to invest and list on the regional stock exchange (BRVM), which is based in Abidjan and is dominated by Ivorian and Senegalese firms.
There are no significant limits on foreign investment nor are there generally differences in treatment of foreign and national investors, either in terms of the level of foreign ownership or sector of investment.
Restriction on FX and profit repatriation
WAEMU has unified foreign exchange regulations. Under these regulations, there are no restrictions for transfers within the community, and designated commercial banks are able to approve routine foreign exchange transactions inside the community. The transfer abroad of the proceeds of liquidation of foreign direct investments no longer requires prior governments approval.