Ivory Coast, Benin and Kenya tap Eurobond market while Ghana misses out

Across Africa, there is a surge of activity in the sovereign debt market as investors, lured by attractive yields and hopes of easing global interest rates, snap up bonds offered by several nations.

While Ghana finds itself temporarily excluded from this dance – awaiting its turn on the international stage, Ivory Coast, Benin and Kenya successfully issued Eurobonds worth billions this month, exceeding their target amounts by multiples.

Once one of Africa’s fastest growing economies, Ghana remains under an International Monetary Fund (IMF) programme, restricting its access to the market until at least 2026.

Just last month, a temporary debt service suspension for official creditors until May 2026 was announced. This move aims to create breathing room while a restructuring of its US$13billion commercial debt is finalised by March 2024.

Neighbouring success stories

Meanwhile, neighbouring countries are basking in the spotlight. Ivory Coast raised US$2.6billion through two Eurobond tranches, with yields reaching 7.875 percent and 8.5 percent.

Even Benin, a first-time issuer, garnered massive interest, receiving over US$5billion in orders for its US$750million bond. Kenya too, capitalised on investor enthusiasm, attracting US$5billion in orders for its high-yielding bond, according to Bloomberg.

Analysts say investors are regaining their risk appetite for African assets due to expectations that major central banks will relax their monetary policies this year.

Databank, an asset management company, observed that the U.S. Federal Reserve is seen cutting interest rates up to three times in 2024 to support economic growth, while the European Central Bank may also ease policy. Falling returns on assets in developed markets are prompting investors to hunt for yield in riskier emerging and frontier markets like Africa.

However, fund managers note that investors are still pricing African debt at a significant risk premium relative to developed-market bonds.

The spread between 10-year U.S. Treasuries and recent African sovereign bond yields remains historically wide. This indicates investors still regard African bonds as highly speculative, even as appetite for such paper increases.

Successful Eurobond issuances are expected to provide support to African currencies by boosting foreign capital inflows.

Ivory Coast’s bond sale has already buoyed its currency, the CFA franc, while Benin’s debut issuance caused its currency to rally against the dollar earlier this week. More African countries are lining up Eurobond sales this year to take advantage of rising risk appetite among yield-hungry global investors.

Analysts believe that while Ghana sits out for now, it actively works toward rejoining the market. Its successful completion of the IMF programme and debt restructuring could pave the way for its return, potentially attracting similar investor interest as its peers.