Investors can’t get enough of Africa’s debt

Rising demand for African eurobonds is causing a wave of issuances in the continent.

Benin experienced an improvement in its ratings outlook after successfully securing eurobond issuances in January.

In February, Côte d’Ivoire raised $1.03 billion in a eurobond sale in which investors ordered for triple the amount proposed. The sale being referred here was first issued in November and was reopened, making it Africa’s first during the Covid-19 crisis.

Now, Kenya has plans in the works to $1 billion by June using this debt instrument, while Ghana and Nigeria prepare to follow suit.

Eurobonds are of particular interest to investors who desire higher yields than those offered by developed countries, Ogutu says. “Anything that is screaming ‘emerging market’ or ‘frontier market,’ where most of the African economies are pigeonholed into, that’s also what has led to this allure or the oversubscription in the eurobonds that have been issued,” he says.

After effects of the pandemic forced a reduction in borrowing, governments and investors are expressing greater confidence in Africa’s prospects. This is partly due to the billions of dollars worth of Covid-19 recovery aid released by the IMF and other multilateral lenders. African countries normally use eurobond funds to finance maturing debt obligations and huge infrastructure projects, yet some have been critical of the heavy rates African countries are required to pay for these bonds.