WAEMU: Banking Liquidity Contracts to CFAF 4,350 Billion in Q3 2025

In the WAEMU region, banking liquidity is showing signs of measured improvement. In the third quarter of 2025, banks in the zone slightly rebuilt their own cash positions, while their reliance on refinancing from the Central Bank of West African States (BCEAO) declined. This is an encouraging development, although it is not yet sufficient to fundamentally alter the financing structure of the regional banking system.

Over the period, the deficit in banks’ own liquidity in WAEMU—defined as cash holdings excluding BCEAO refinancing—narrowed by CFAF 78.5 billion to stand at –CFAF 3,567.6 billion. While this improvement remains modest given the historically high level of the deficit, it marks a notable shift compared to previous quarters.

Two main factors explain this favorable trend. On the one hand, banks benefited from net cash inflows at their counters amounting to CFAF 234 billion, reflecting a partial decline in currency in circulation. On the other hand, net transfers received by banks contributed positively by CFAF 181.7 billion, supporting their liquidity positions.

These positive effects were, however, partly offset by transactions with public treasuries and other net factors, which exerted a negative impact of CFAF 337.2 billion. Interactions between public finances and the banking sector therefore continue to play a central role in shaping liquidity dynamics across the region.

Decline in BCEAO Refinancing

Consistent with the slight rebuilding of banks’ own liquidity, reliance on central bank funding declined during the quarter. The total volume of refinancing provided by the BCEAO fell by CFAF 122.6 billion between the end of June and the end of September 2025, reaching CFAF 7,919.9 billion.

The decrease was observed across all refinancing windows. Weekly refinancing declined by CFAF 75.5 billion, while monthly refinancing fell by CFAF 72.2 billion. This trend points to reduced immediate pressure on banking liquidity, without calling into question the BCEAO’s central role as the main provider of funding.

Overall, aggregate banking liquidity—combining banks’ own liquidity and central bank refinancing—declined by CFAF 44.1 billion over the quarter, standing at CFAF 4,352.3 billion at the end of September 2025.

Despite this contraction, banks’ structural dependence on the BCEAO remains high. During the third quarter, the monetary authority continued to fully meet the liquidity needs expressed by credit institutions at its refinancing windows, confirming its role as a key shock absorber for imbalances in the regional money market.

This situation unfolds in the context of accommodative monetary policy. Following the 25 basis-point rate cut decided by the Monetary Policy Committee in June 2025, key policy rates have remained unchanged since 16 June. The minimum bid rate at auctions stands at 3.25%, while the marginal lending facility rate remains fixed at 5.25%.