By Eric Ombok
Infrastructure projects and business expansion driving demand
Size of transactions grown exponentially over past 15 years
Citigroup Inc. expects the value of deals from sub-Saharan Africa to exceed 2019 levels as governments, state-owned institutions and companies in the region raise more debt for much-needed infrastructure.
“Countries like Ethiopia and Angola, for instance, are undergoing transformations that are creating a whole range of new financing needs and opportunities to deploy capital,” Michael Mutiga, Citigroup’s head of corporate finance for the region, said in an interview in the Kenyan capital Nairobi. “It is an exciting time across the continent.”
The New York-based lender is seeking to tap a funding shortfall for infrastructure projects that the African Development Bank estimates could be as much as $100 billion a year. Nigeria and Benin are among countries considering Eurobonds, following sales by Ghana and Gabon earlier this year, as demand for the continent’s high-yielding debt soars.
Read more: Eurobond Demand Prompts Gabon to Weigh Another Sale in 2020
“We’re looking at a handful of sovereign mandates at the moment,” Mutiga said, declining to be more specific. “We are having opportunities across nearly all our 16 presence countries where Citi has a physical presence, and a large number of our non-presence countries.”
Citigroup has helped raise about $30 billion in sub-Saharan debt funding in the bond and loan markets over the past five years, mainly in its key markets of South Africa, Nigeria, Kenya, Zambia, Senegal and Ivory Coast, he said. The continent raised a record $30 billion in Eurobonds in 2018.
Some of the deals the company is working on include government transactions for a mix of bonds and loans to fund new warehouses, power transmission lines and power-generation plants, Mutiga said. There are also transactions in mining, oil and gas and companies seeking to build factories.
Here are more highlights from the interview:
“The market has evolved and is deepening at an incredible rate. For instance, 15 years ago, in many countries in sub-Saharan Africa a financing for $10-20 million was viewed as a very large transaction.”
“Now, the scale of opportunities and size of companies means we are seeing a number of corporate financing” deal “starting to cross the $1 billion and greater mark.”
“We are supporting a lot of companies in a wide range of financing requests, from capital expenditure to acquisition financing. We are also looking at companies that want to expand across the region geographically in addition to deepening penetration in respective markets.”
“In the banking space, an interesting trend has been an increasing demand for foreign-currency access, where, in essence, banks are looking to supplement their local currency deposit bases with foreign currency liquidity.”