(Ecofin Agency) - With the growing economic and financial challenges, West African governments are emerging as key players, not just as regulators but also as strategic shareholders. This trend could reshape the banking landscape in West Africa in the coming years.

Over the past five years, the governments of the West African Economic and Monetary Union (WAEMU) have significantly increased their stakes in credit institutions. From 2019 to 2023, public ownership—held by the states and their subsidiaries—more than doubled, rising from CFA300.6 billion ($508.6 million) to CFA641.9 billion ($1.08 billion).

This sharp 113.5% increase reflects a strategy by governments to strengthen their influence in a critical sector often shaken by economic turmoil. It also ensures they have the financial leverage needed to support their development projects. National needs have been growing steadily, especially in light of the recent crises that have affected the region and the world.

After the privatization phases of the 1980s and 1990s, driven by structural adjustment programs imposed by the International Monetary Fund (IMF) and the World Bank, governments are making a strong comeback, as indicated by recent data from the WAEMU Banking Commission.

In 2023, 23 credit institutions, representing 21.3% of the Union’s banking assets, are now majority-controlled by the state. This trend is evident across most countries in the Union, with Côte d'Ivoire leading the way. In the Union’s largest economy, state ownership in bank capital surged from 16.6% in 2019 to 32.9% in 2023, a remarkable 16.3 percentage point increase. This move by Abidjan underscores its determination to strengthen its grip on the banking sector, particularly to support its debt policy.

The example of Côte d'Ivoire is part of a broader trend. In February 2023, French banking giant BNP Paribas sold its majority stake in the Banque Internationale pour le Commerce et l’Industrie de la Côte d'Ivoire (BICICI) to a consortium of Ivorian public entities, including the Banque Nationale d'Investissement (BNI), IPS-CGRAE, the Caisse des Dépôts et Consignations de Côte d'Ivoire (CDC-CI), and the Caisse Nationale de Prévoyance Sociale (CNPS). This consortium, with the approval of President Alassane Ouattara, acquired 67.49% of the bank's capital for CFA80 billion.

Similar dynamics are seen in Mali and Benin. In Mali, state ownership in banks rose from 23.5% in 2019 to 32% in 2023, in a context where banking stability is crucial given the security and political challenges. In Benin, public stakes soared from 9.5% to 25.9%, a 16.4 percentage point jump, driven by the creation of the Banque Internationale pour l’Industrie et le Commerce (BIIC) in 2020. This new bank, formed from the merger of two local banks and now entirely state-owned, has become the country’s largest bank by assets. Burkina Faso and Senegal also saw increases of 6.1 and 6.6 percentage points, with state ownership reaching 22% and 14.1% respectively in 2023. Niger’s public ownership also grew, from 22.5% to 24.6% during the same period.

Togo: The Exception

While most states are increasing their involvement, Togo is an exception, with a gradual withdrawal. Public ownership in Togo dropped from 14% in 2019 to just 8.6% in 2023, reflecting the state’s shift towards greater private sector participation. In 2021, the Togolese government sold 90% of its stake in BTCI to IB Bank, a holding company owned by businessman Mahamadou Bonkoungou. The bank was rebranded as IB Bank Togo.

Conversely, Guinea-Bissau, although still showing a relatively low level of public ownership (11.7% in 2023), recorded a notable 1.8 percentage point increase over the same period.

Private Ownership Declines

Overall, states have benefited from the gradual withdrawal of foreign banks from the WAEMU region. Foreign ownership, which was valued at CFA633 billion in 2019, fell to CFA500.3 billion in 2023. This disinvestment led to a decrease in the relative share of foreign players in the banking sector’s capitalization, dropping from 32.2% in 2019 to just 21% in 2023. The retreat of foreign investors paved the way for increased state involvement, sometimes at the expense of local private investors. Despite the growth in their holdings—estimated at CFA1,094.2 billion in 2019 and reaching CFA1,243.2 billion in 2023, a 13.6% increase over five years—private ownership in the Union’s banking sector has declined, representing 52.1% of the sector’s capitalization at the end of 2023, down from 54% in 2019.