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Chad Offers Cameroon Higher Interest Rate On Bonds 

By Joe Dinga Pefok

Observers have realised that the Chadian Government is offering a higher interest rate (six percent) than what the Cameroon Government offered last year (5.6 percent) in the sale of 10 million shares (Government bonds) to raise circa FCFA 100 billion. The Chadian Minister of Finance and Budget, Gata Ngoulou, was in Douala recently to launch the sale of the shares where the nominal value of a share was tagged at FCFA 10,000.

The subscription period for the Chadian shares opened on May 24 and will end on June 23 and the sale of the shares is under the authorisation of the Central African Sub-regional Financial Market Commission, COSUMAF, and the operation is handled by the Libreville Stock Exchange, which is the sub-regional stock exchange.

The duration of the shares will be five years; 2011-2016 and the shares are being placed by a syndicate of 15 financial institutions led by Ecobank. The other financial institutions involved in the operation that have branches in Cameroon, including; Afriland First Bank, BICEC, CBC, SGBC, as well as the EDC Investment Corporation which is an affiliate of the Ecobank Group.

Last year, the Cameroon Government, in a bid to borrow FCFA 200 billion through the Douala Stock Exchange, DSX, offered an interest rate of 5.6 percent on the shares. The Minister of Finance, Essimi Menye, claimed it was one of the most attractive interest rates that could ever be offered by any country in the continent.

Quizzed if his Government did not deliberately raise the interest rate to so as to undercut the Cameroon Government, Gata said the decision by Chad to fix its own interest rate at six percent had nothing to do with the interest rate fixed by Cameroon. He said Chadian authorities adopted the six percent interest rate after a lot of consultations with experts. 

Economic analysts in Douala are unanimous that the Cameroon Government will, unlike last year, likely find it difficult to raise money through public borrowing, with its 5.6-percent interest rate. The Government has reiterated that this financial year, it will try to raise FCFA 150 billion through the sale of bonds to finance some projects in the 2011 state budget.

As to the how the Chadian Government will raise funds for the annual payment of the interest, as well as the eventual repayment of the money to subscribers, Minister Gata said a special account has been opened at the Bank of Central African States, BEAC, where the oil company operating in Chad, TOTCO, will be paying in money meant for the State of Chad quarterly.
The Minister as well stated that the operation for the sale of Government bonds was validated by Presidential Decree No. 195/PR/2011 of 10 February, 2011.

As to how the Chadian Government plans to spend the FCFA 100 billion sought, the Minister said the bulk of the money will go for social projects, while part will go for the settlement of internal debts. It is surprising that an oil producing country like Chad should be going round the Central African sub-region to publicly borrow FCFA 100 billion.

However, information on the shareholdings of TOTCO found in a document presented at the ceremony indicates that, Chad owns only 15 percent of the shares of the company, while rest is owned by a consortium comprised of two American companies, Exxon Mobil and Chevron Texaco, as well as a Malaysian company, Petronas.

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