The Central African Economic and Monetary Community (CEMAC) is facing structural challenges in its Treasury securities market, where government borrowing remains heavily concentrated among banks. As of January 31, 2026, outstanding Treasury securities in the region reached a significant 9,451.5 billion CFA francs (XAF), with banks, particularly primary dealers, holding the lion's share of this debt.

Primary dealers in the CEMAC region possess the largest portion, holding 5,973.6 billion XAF in government securities, which accounts for approximately 63% of the total outstanding stock. Other banks, those without primary dealer status, hold an additional 1,297.3 billion XAF, representing about 13.7% of the market. This substantial concentration means that commercial banks collectively absorb a vast majority of the Treasury issuances, making the regional bond market predominantly bank-driven.

Institutional investors, comprising insurance companies, pension funds, and investment funds, rank third with holdings of 1,808.8 billion XAF, or roughly 19.1% of the outstanding debt. The Bank of Central African States (BCAS) holds a smaller fraction, 84.2 billion XAF (0.9%), primarily resulting from liquidity operations within the financial system. Retail investors currently play a minor role, with about 2,219 individual investors holding 287.6 billion XAF in Treasury securities, just over 3% of the total market.

This reliance on a limited group of banks to finance public debt creates several risks for both governments and the financial system. Banks are subject to regulatory ceilings on their exposure to sovereign debt, set by the regional banking regulator. Once these limits are approached, banks face difficulties in purchasing new government securities, potentially hindering future government borrowing capacity. Furthermore, when banks hold large volumes of sovereign debt, their balance sheets become closely intertwined with those of the states. Should government finances weaken, banks could experience pressure on their asset quality and capital.

Another significant risk is the crowding out of private sector lending. Banks that allocate substantial portions of their balance sheets to government securities may reduce the credit available to businesses and individuals, thereby limiting private investment and economic growth. Regional authorities have explicitly warned about this risk, recognizing the structural limits it imposes on market development and economic diversification.

To address these challenges and ensure the sustainability of the CEMAC financial market, expanding the investor base is a top priority for regional financial authorities. Encouraging institutional investors like pension funds and insurance companies, as well as retail investors, to play a larger role in government debt markets is crucial. Additionally, developing a deeper and more liquid secondary market is deemed necessary to improve price discovery and market liquidity. Financial authorities are also encouraging banks to sell parts of their existing portfolios to these diverse investor groups to increase market liquidity and support future government funding needs. Without successful diversification of investors, governments in the CEMAC region may face increasing constraints in raising new funds as banking exposure limits are reached.