West African nations in the eight-nation economic and monetary union are struggling to obtain cash on the regional capital market, according to financial market sources, as investors want higher interest rates amid tightening liquidity.
Ivory Coast failed to issue local currency debt in March, while Senegal, Mali, Niger, and Burkina Faso all recently canceled or postponed bond offerings, as seen by a report from the American news agency, Reuters.
According to Reuters, the inability to obtain much-needed cash from the regional market may compel nations to seek alternative, cheaper funding sources such as the International Monetary Fund (IMF) to avert budget shortages.
"There is currently a serious liquidity crisis for states on the regional financial market. The interest rates offered do not reflect the reality of the market," said Isidore Tanoe, director of Abidjan-based financial services firm Majoris Financial Group.
Tanoe believes interest rates should be between 6.5% and 6.80%, rather than the 5.80% to 5.95% now given by governments.
The Ivory Coast, the largest country in the West African Economic and Monetary Union, failed to generate 85 billion CFA francs ($142 million) with bonds offered at 5.5% interest. It returned to the market to raise financing at a rate higher than 6%.
According to the finance ministry, Ivory Coast expects to generate 3.1 trillion CFA to finance its 2023 budget, with 2.5 trillion CFA projected to come from the regional market.
A finance ministry source told Reuters that the nation might possibly seek bilateral help and money from a consortium of banks. He asked to remain anonymous since he is not authorized to speak to the media.
"When market conditions are not favorable at a given time, we withdraw to come back with a better offer," he said, adding that the next bond issuance will take into account the realities of the market, and interest rates will be adjusted.
Debt auctions in Mali, Benin, Burkina Faso, and Senegal have all been postponed. Senegal returned to the market on March 31 to raise more than 201 billion CFA at an interest rate above 6%, according to a statement from the finance ministry.