In Cameroon, a post-election macro landscape looms. With XAF liquidity dropping, currency appreciation, gold vs. crude oil exports, and year-end volatility forecasts are what we can expect.
A drop in XAF liquidity
Cameroon is by far the largest, (in both population and GDP), within the Central African Currency Union. The country went to the polls last month and the drop in XAF liquidity caused rates to somewhat artificially appreciate over the last 10 days.
Less XAF was in circulation as market participants held their breath for the outcome. President Biya secured his 8th successive term with 53.66% of the vote.
Post-election pent up demand, you’d expect, would cause quite a dramatic reversal of election time currency gains when local banks reopened their doors but so far, this hasn’t been the case.
Pre-election rates continue
Army Chief Meka announced an extension of the army's exceptional deployment until at least December 12th, propagating the theory that things are not yet business as usual. The parallel market relented its sharp appreciation, some quoting as low as 680-685 to the Euro (from highs of 720 earlier in the year). Quotes still remain below pre-election levels. Coinciding currency strength with the seasonality of Christmas, a period of rampant remittance demand and you get the recipe for further rate consolidation in the Central African region. Our position may be a little pre-emptive, there is certainly room for an aggressive spike in hard currency demand over the next few weeks, which could see some gains shed, either way, expect some volatility into the end of year.
During the sporadic protests and then military clampdown, bond prices shed some weight (touching 94 cents on the dollar on the 2031s before reversing back just shy of 95 cents at time of writing), and there was (even more apparent than normal) asymmetric information as to where XAF was trading in the parallel market.
Exports
From an export perspective, Cameroon was benefitting from gold’s bull run. At the same time there was this meteoric rise topped at $4400. Oppositely, Cameroon’s largest export, crude, has taken another battering dropping 3.5% on the expectation that OPEC were to hike output, overall leaving the export picture wanting. Next price floor being $50 a barrel. The Central African stock exchange (BVMAC), rounded off the year in the red, underperformance over the last 5 years (except 2023).
A slight reprieve may come in the form of regional bank, BGFI Holding Corporation, finally getting the IPO greenlight after first attempting in July but getting waylaid by a shareholder dispute. This would be a silver lining to an otherwise dark exchange cloud, where investors blame a general lack of liquidity and general trading activity as to why activity remains suboptimal for the foreseeable.
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