Sub-Saharan African nations are staging a comeback in the international capital markets, breaking free from the debt-stress narrative that has lingered since 2020. The recent appetite for fresh debt from Ivory Coast and Benin signals a shift away from market apprehensions, with even some previously concerning borrowers like Kenya entering the fray with eurobond buybacks and new issuances. After a period where the entire continent was viewed as a distressed credit, market indicators now suggest that the fears of other African nations following in the footsteps of Ghana, Zambia, and Ethiopia into default are dissipating.Thank you for reading this post, don't forget to subscribe!
In the midst of this turnaround, Nigeria is now in focus as the region’s economic giant. A confluence of factors, including the Covid-19 pandemic, the Russia-Ukraine war, and rising global interest rates, had weighed heavily on riskier African nations since 2020. However, with the easing of inflation and an increasing demand for high-yield bonds, Ivory Coast and Benin have successfully tapped into the international bond market. Nigeria, with its significant economic influence, is now positioned to gauge investor sentiment.
The story of Ivory Coast, rated Ba3 with a positive outlook by Moody’s Investors Service, and Benin, one level below Ivory Coast, paints an optimistic picture. Both nations witnessed substantial investor demand for their bonds, with Ivory Coast securing $8 billion for its $2.6 billion bond sale and Benin receiving $5 billion in orders for its $750 million debt issuance. These transactions, marked by yields in single digits, signify a positive trajectory for Sub-Saharan Africa’s debt market.
While Kenya contemplates a new bond issuance, Nigeria eyes the potential for a return to the international bond market. With successful transactions in Kenya, there is anticipation that Nigeria, as well as Angola and South Africa, could follow suit in the coming months. The narrowing spread between African bond yields and US Treasuries, reaching its lowest since May 2022, and the extraordinary support from the International Monetary Fund further bolster market sentiment.
In the words of Kristalina Georgieva, Managing Director at the IMF, there is acknowledgment that while some African countries grapple with high debt levels, it is not a universal problem. The region, buoyed by IMF support and improved market conditions, is poised to shed the distressed credit label, presenting new opportunities for African economies on the international stage.