By Prof. Amath NDIAYE, FASEG-UCAD.
In the UEMOA, the question of bank liquidity is often mentioned without being clearly explained. However, the figures for the third quarter of 2025 provide a central lesson: banks in the region are structurally dependent on the Central Bank, and this dependence is closely linked to the financing of state budget deficits.
Bank liquidity refers to the ability of banks to meet their immediate obligations: withdrawals by depositors, interbank payments, settlements with the State, and normal credit granting. It is, in a way, the daily fuel of the banking system. A bank can be financially sound, but without sufficient liquidity, it cannot operate normally.
In the UEMOA, it is essential to distinguish between the banks’ own liquidity – their autonomous cash flow – and the liquidity provided by the Central Bank. In the third quarter of 2025, the banks’ own liquidity in the banking system is massively negative (-3,567.6 billion CFA francs). This figure is fundamental: it means that, without the permanent intervention of the Central Bank, banks in the region would not be able to meet their current commitments.
Faced with this structural deficit, commercial banks resort to refinancing from the BCEAO. Refinancing refers to loans granted by the Central Bank to banks to provide them with the necessary liquidity for their operations. Through this mechanism, the BCEAO fully assumes its role as the lender of last resort for the banking system.
In concrete terms, when a bank lacks liquidity, it presents itself at the Central Bank’s counters with assets as collateral, called collaterals, and receives short or medium-term resources in return. In the UEMOA, these collaterals consist mainly of public securities (bonds and obligations issued by the States), but also, in some cases, of eligible private receivables. Public securities are preferred because they are considered safer and more liquid.
As of the end of September 2025, the refinancing granted by the BCEAO to banks is positive and very high (+7,919.9 billion CFA francs). This level clearly shows that recourse to the Central Bank is neither exceptional nor temporary: it is structural. In other words, the banking system of the UEMOA operates sustainably thanks to central liquidity provided by the BCEAO.
Total bank liquidity, which corresponds to the sum of banks’ own liquidity (negative: -3,567.6 billion CFA francs) and BCEAO refinancing (positive: +7,919.9 billion CFA francs), stands at 4,352.3 billion CFA francs as of the end of September 2025. This figure illustrates a simple but essential reality: the liquidity of the banking system relies primarily on the action of the Central Bank as the lender of last resort.
This structural dependence is directly linked to the public debt of the States. UEMOA countries record significant budget deficits, which they finance through the issuance of bonds and obligations on the regional market. The main buyers of these securities are commercial banks. But in order to acquire them, banks must have liquidity, which they precisely obtain from the BCEAO. The Central Bank thus becomes the indirect pillar of public deficit financing, even though it does not lend directly to the States.
Contrary to some received ideas, the BCEAO already strongly supports public finances. However, this support is subject to strict constraints. The Central Bank cannot engage in massive quantitative easing policies, as it must preserve two fundamental balances: low and controlled inflation and an adequate level of foreign exchange reserves. These two elements are essential to maintain monetary credibility, reassure foreign investors, and support sustainable economic growth.
Ultimately, the real challenge is not to demand more monetary creation, but to gradually reduce the dependence of States and banks on central liquidity, through better budget discipline, more effective management of public cash flow, and deepening regional financial markets.
About
Prof. Amath Ndiaye is a prominent Senegalese economist, holding a Doctorate in Economics from Cheikh Anta Diop University in Dakar (2001) and a Doctorate in Development Economics from the University of Grenoble, France (1987). Since 1987, he has been teaching at the Faculty of Economics and Management at Cheikh Anta Diop University in Dakar. A recognized expert, he has collaborated with prestigious institutions such as the African Development Bank, the World Bank, and the IMF, specializing particularly in exchange rates, economic growth, and institutional development. He was an expert member of the steering committee of the African Union Commission for the Creation of the African Central Bank. Prof. Ndiaye is the author of numerous influential publications, particularly on exchange rate regimes and economic growth in West Africa. Fluent in Wolof, French, and English.
