In July 2025, the West African Economic and Monetary Union's interbank market recorded a significant contraction in trade, illustrating the underlying tensions in a seemingly solid banking system facing persistent liquidity scarcity.

The average weekly transaction volume fell to 774.1 billion CFA francs, a decrease of nearly 12%. The benchmark interest rate edged down slightly to 4.80%, and bank lending rates followed suit, providing relief to borrowers. Term deposits, for their part, earned better returns, while annual inflation remained negative at -0.9%, supported by falling food prices and thus helping to preserve household purchasing power.

But behind these reassuring figures, the banking sector is facing growing constraints. Institutions are hoarding reserves well above regulatory requirements, preparing the ground for regional and international uncertainty, the potential rise in imported food prices, and risks related to political and climate instability. At the same time, demand for liquidity from the BCEAO remains high, reflecting the need to secure funding and comply with prudential ratios, while anticipating possible acquisitions or consolidations of foreign banking subsidiaries.

This precautionary accumulation has resulted in a certain restriction of credit to the private sector. Lending to businesses and households is growing slowly, struggling to keep pace with regional economic growth, while banks' exposure to government borrowing is increasing, accentuating the risk of crowding out the private sector. Some WAEMU countries, such as Niger, face much higher financing costs than others, creating gaps that complicate the dynamics of a supposedly integrated and inclusive money market.

Beyond liquidity and interest rate issues, the interbank market also raises governance and regional integration challenges. The concentration of loans toward certain states or companies deemed safe creates imbalances and could limit investment diversification, while regional risk-pooling mechanisms remain underutilized. This situation underscores the importance of strengthening coordination between banks, regulators, and governments to ensure that monetary dynamics serve the entire economic fabric and truly support inclusive development within WAEMU.

At the same time, banks must contend with competition from governments in the money market. Institutions often prioritize sovereign loans deemed safe over the private sector, which can hamper innovation and business expansion, particularly for smaller companies. This crowding-out effect could exacerbate inequalities between countries and sectors, making vigilance and better financial planning essential to prevent apparent stability from masking latent weaknesses.

Despite these tensions, the BCEAO maintains a prudent monetary framework, guaranteeing the stability and resilience of the region. This context highlights the complexity of the regional financial landscape, where the scarcity of liquidity, the banks' hoarding strategy, and the orientation of credit reveal a market where anticipation and coordination are essential to support economic activity and preserve the integrity of the banking system.