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Can Bola Tinubu revive Africa’s sleeping giant?

Nigeria’s economy has underperformed for years. President Bola Tinubu made waves with bold initial reforms, but faces a tough task to persuade investors that Nigeria is open for business.

As Bola Tinubu surveyed the assembled dignitaries in Abuja’s Eagle Square on 29 May, Nigeria’s new president could have been forgiven for wondering what he had let himself in for.Inflation was running at 22%, the highest for 18 years. Public finances were crippled by fuel subsidies that guzzled nearly a quarter of the government’s budget. Oil production, the major source of export revenues, remained at a near 30-year low. Militancy continued to plague various parts of the country.Tinubu, the 71-year-old former governor of Lagos State, belongs to the same political party as his predecessor, Muhammadu Buhari. But while the then 80-year-old former president clung rigidly to economic policies that the rest of the world has largely eschewed since the 1980s – with predictably dire results – Tinubu has charted a dramatically different course since taking office.The new president used his inaugural address to confirm the immediate removal of fuel subsidies. Days later, he brought an end to the confusing system of multiple exchange rate “windows” for the national currency, allowing the naira’s official and black-market rates to begin to converge. Tinubu also wasted little time in dismissing several high-profile officials, including the governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, who now faces prosecution on corruption charges.Influential voices are optimistic that Nigeria’s economy is now poised to begin its recovery. The new administration has brought a “massive step change” in policymaking, says Danladi Verheijen, co-founder and managing partner at Verod Capital, one of Nigeria’s largest private equity firms.“It’s a much better cabinet, much more pro-business”, he says. Newly appointed officials such as finance minister Wale Edun and the CBN’s new governor, Olayemi Cardoso, are far more experienced and “private sector-led growth oriented” than their predecessors, Verheijen adds.As a result, he is seeing signs that international investors, after years of shunning Nigeria, are ready to give the country another chance. “The business class section on the flights into Nigeria is full again.”

Nigeria’s challenge – import less, make more

For decades, it would not have been unfair to suggest that Nigeria’s economic model was based around exporting crude oil and importing almost everything else.

The bankruptcy of this approach is now clear to see. Many Nigerians are struggling to afford basic necessities, particularly since Tinubu’s currency reforms caused imported goods to become more expensive. Millions of young adults have little or no paid employment, reflecting the longstanding neglect of the manufacturing and agricultural sectors.

The challenge for Nigeria boils down to a simple reality. The country needs to stop importing so many goods that could easily be produced locally. Ideally, it also needs to start exporting a much greater range of value-added products to international markets. If Tinubu can move the needle on this challenge, his presidency is sure to be considered a success.

Efforts are certainly underway to bring fundamental change to Nigeria’s economy. One glimpse into a possible future can be seen 65km outside of Lagos, where the Lagos Free Zone, which includes a recently-opened deep water port, aims to become a major manufacturing hub.

The first fully privately-owned free zone in the country, it is operated by Singaporean conglomerate Tolaram. Investors that establish manufacturing facilities within the 850-hectare site benefit from a generous range of tax and customs incentives. Consumer goods giants including Kellogg’s and Colgate-Palmolive, along with German chemicals company BASF, are among the firms to have set up shop.

Tejaswi Avasarala, deputy CEO of the Lagos Free Zone, says that Tolaram’s aim is to “create a thriving ecosystem with world-class infrastructure, facilities and services”. He adds that the completion of Lekki Port, the first modern deep-sea port in Nigeria, in April 2023 has “significantly enhanced” the Free Zone’s overall attractiveness for export-oriented companies.

Infrastructure challenges

The Free Zone is part of a major cluster of developments within the Lekki Industrial Corridor. The new Dangote Petroleum Refinery looms in the distance. An international airport is set to arrive at some point in the future.

But the challenge in attracting the modern consumer industries that Nigeria so badly needs is starkly illustrated by the state of the road between the Lekki Industrial Corridor and the city of Lagos itself. Trucks travelling between the megacity and the industrial hub must endure hours of treacherous conditions along gridlocked and potholed roads.

Avasarala acknowledges that “efficient road connectivity is a critical success factor” for the Free Zone. He points out that construction work is underway to upgrade road links, while a freight rail line is also on the drawing board. The completion of this critical infrastructure cannot come fast enough if the Free Zone is to fill its modern industrial facilities and warehouses with new tenants.

At least in theory, the Free Zone should now be more appealing to manufacturers as a result of the naira’s depreciation against the dollar. Nigeria’s currency lost more than 30% of its value on the official market within days of the new government’s partial liberalisation of the exchange rate regime last June.

“The increased cost of importing goods has made domestic manufacturing more economically viable for many companies,” says Avasarala, who claims that there has been a “noticeable shift” in investor interest in manufacturing within Nigeria.

Yet elsewhere in Nigeria, there is little evidence that the naira’s depreciation is having a positive effect, at least in the short term.

In fact, several major brands have scaled back their Nigerian manufacturing operations since Tinubu took office, owing to lower consumer purchasing power and the higher cost of imported raw materials and other inputs. Proctor & Gamble said in December that it would stop producing health and hygiene products at its Nigerian facilities in the latest blow to Nigerian industry.

Were the changes too much too soon?

This leads to an uncomfortable question for the new administration: has it tried to change too much, too fast?

The removal of fuel subsidies, though widely agreed to be necessary, has brought huge financial hardship for tens of millions of Nigerians. For decades, the government kept petrol prices at artificially low levels. When Tinubu finally removed the subsidies, the price of petrol soared dramatically overnight. Motorists are paying more than three times as much as a year ago to fill up their vehicles.

Whether the subsidy is in fact quite as dead as it appears is debatable. The World Bank suggested in December that a cost-reflective price of petrol would be around N750 ($0.95) per litre, which is about N100 per litre more than consumers are currently paying.

Even so, the subsidy reforms, along with the naira’s depreciation, has had a huge impact on the cost of living. Inflation reached 28% in November, up 6% from when Tinubu took office.

Basic services are teetering. Small hospitals and clinics, for example, “are having a lot of problems keeping up with bills,” says Njide Ndili, country director for Nigeria at healthcare foundation PharmAccess. As well as having to cope with the cost of diesel generators, hospitals find that staff struggle to get to work due to petrol costs, while patients are unable to pay for insurance or treatment.

Stopping the ‘brain drain’

Meanwhile, Ndili adds, the “brain drain” of healthcare professionals has accelerated, as staff flock to developed markets where their earning power is far greater. “We are really at a critical point with human resource for health,” she warns.

Maureen Ogbonna, founder of management consultancy Vallore Nigeria, adds that there are similar trends in other sectors. “A lot of people are migrating out of Nigeria at the moment,” she says, noting that it is often the most educated personnel that have the greatest opportunities to move abroad. “They don’t want to wait for the reforms to kick in.”

It is “a bit too soon to tell” whether Tinubu is really moving the country in the right direction, says Gbemisola Alonge, consultant at advisory firm Africa Practice. She points out that leading credit rating agencies have largely welcomed Tinubu’s reforms, without actually upgrading the country’s rating. “The reason the ratings haven’t improved is because the fundamentals haven’t changed,” she says.

Meanwhile, Alonge suggests that there are “mixed feelings” around some government officials. Although the new CBN governor has been praised by investors for committing to more conventional monetary policies, his repeated postponement of monetary policy committee meetings has brought “uncertainty in policy direction”, Alonge says. “That indecision is a decision in itself, because choosing not to meet means you’re choosing to retain the rates the way they are.”

Economic potential is far from realised

Nigeria’s economic potential is recognised around the world, not least because of the sheer size of its market. The UN expects the country’s population to grow from around 220m today to 374m by 2050 – by which time Nigeria will be on the brink of overtaking the United States as the world’s third most-populated country.

Yet Nigeria’s “potential” is only discussed so much because it remains so far from being realised. Despite its massive oil wealth, by some metrics, Nigeria is one of the world’s least developed countries. Life expectancy is shockingly low, at just 53.9 years according to UN figures – the second worst in the world.

Tinubu faces an enormous challenge as president in reversing the trends that have seen Nigeria sink into economic and social malaise.

Yet, there are many reasons for optimism. The country’s tech sector has flourished over the past decade, producing more billion-dollar “unicorns” than the rest of Africa combined. Digital infrastructure has rapidly spread across the country, bringing at least basic connectivity to the vast majority of the population, and paving the way for a range of business innovations. And, of course, Nigeria is renowned for its entrepreneurial culture and ability to produce world class business leaders.

Bucking the trend

Regardless of whether or not Tinubu proves more effective than his predecessors, the country’s entrepreneurs are determined to press ahead with their efforts to unleash Nigeria’s potential.

“We’ve not grown up expecting a lot from the government,” says textile entrepreneur Chekwas Okafor. “I’m sure they’re doing their best, but I do not have any support from the government.”

Okafor spent several years working in the United States, where he started a business retailing luxury African fashion. But, partly inspired by the success of Nigeria’s iconic 2018 World Cup football shirt, he decided to return to his home country in an effort to help revive its moribund garment manufacturing industry.

Okafor’s company Onchek now operates two facilities in Lagos – one where cotton yarn is knitted into fabric and a second where the fabric is cut and sewed into t-shirts for the local market. In total, around 200 people are employed across the two sites.

If Okafor is to succeed, he will have to buck the trend in an industry where Nigeria has been comprehensively outcompeted by Asian rivals over recent decades. Hundreds of thousands of jobs have been lost, especially in northern cities, since the heyday of Nigeria’s textile industry in the 1980s.

The Buhari administration announced several initiatives to revive garment manufacturing, but never appears to have made a serious effort to implement its plans.

Can Tinubu do better? Even if Okafor is not banking on government support, he does believe the new administration is “thinking about [manufacturing] a lot more now, because of the dollar situation”. He is confident that the naira’s devaluation will have a positive long-term impact on the sector, given the increased costs of importing goods.

Making the vision a reality

It does not in fact take too great a leap of imagination to see Nigeria, with its low labour costs, becoming a significant manufacturer of garments worn by customers around the world.

As with so many areas, Nigeria’s potential is clear. Identifying the need for change and drawing up a vision for the future is the easy part for Tinubu and his team as they seek to bring far-reaching reforms to the Nigerian economy.

Tinubu has scoured the world since taking office, appearing in capitals across Europe and the Middle East, as he attempts to persuade foreign investors to invest in Nigeria.

Whether his efforts will succeed depend not on his government’s plans, but on its performance – on his ability to demonstrate to foreign multinationals, as well as home-grown entrepreneurs, that a more conducive business environment is in place.

“It’s not rocket science,” says investment advisor Olugbolahan Mark-George. “We’re not short of policies and documents – it’s execution that’s the critical thing.”

Ben Payton

Ben is Energy and Infrastructure Reporter at African Business.

Source: AfricanBusiness, 8th January 2024


Economic review: 2024 and its key challenges [Business Africa]

After a tumultuous 2023 for African economies, 2024 is shaping up to be equally challenging.

2024: New Year, New Economic Challenges

The economic pace in Africa, slowed by the Covid-19 crisis and impacted by the consequences of the Ukrainian conflict, has been tested throughout 2023. As the new year approaches, the almost endemic inflation raises questions about its sustainability, prompting reflection on sectors deserving investment priority.

Rabah Arezki, economic expert and former vice president of the African Development Bank, sheds light on the challenges of 2024 in an Exclusive Interview with Business Africa.

Record US-Africa Trade in 2023

A review of US-Africa collaboration in 2023: a memorable chapter with the ratification of over 550 trade and investment agreements.

As the African population continues to grow, and its economic potential expands, the United States has shown a strong willingness to strengthen ties with the continent last year. More details with American analyst Calvin Dark.

In Search of Energy Self-Sufficiency: Challenges in Rural Communities in Congo

In the Republic of Congo, despite the proximity of pipelines, power plants, and high-tension lines, the electricity deficit persists in villages in the oil-rich region of Pointe-Noire, resulting in losses for local businesses. A report by our correspondent Cédric Lyonnel Sehossolo.

Source:  Africanews, 4th January 2024


BRICS expansion: five countries join ranks

Saudia Arabia, Egypt, the United Arab Emirates, Iran and Ethiopia joined the ranks of the BRICS group on Monday, January 1.

The five countries were to join the group in August 2023 at the 15th BRICS summit in Johannesburg, South Africa. Argentina was also invited but backed out at the end of December.

The BRICS group of emerging countries was formed in 2006 by Brazil, Russia, India and China, with South Africa joining in 2010.

It has since become an important platform for cooperation among emerging markets and developing countries. The doubling of its members on Monday is aimed at increasing the group’s clout on the global stage.

Global expansion

The newly expanded BRICS has a combined population of about 3.5 billion people, with a combined economy worth over $28.5tn or about 28% of the global economy

The group’s growth could mark a shift in the geopolitical landscape, although analysts remain uncertain as to whether the expansion will be a help or a hindrance to BRICS members.

Some experts say that differences within the group could weaken decision-making and BRICS’ power overall.

However, BRICS countries are hoping that the expansion will lead to greater representation for emerging economies and a chance to move away from reliance on the US dollar.

In August last year, Brazil’s president called for BRICS nations to adopt a common currency for trade and investment between each other.

Russia’s presidency

Russia took over the BRICS presidency on Monday, following on from South Africa’s chairmanship in 2023.


Under the motto “Strengthening Multilateralism for Equitable Global Development and Security”, Russia will hold the chair for one year and will host the BRICS annual summit in Kazan in October.

Russian president Vladimir Putin has said he plans to increase BRICS’ role in the international financial system and will “spare no effort to ensure that […] we facilitate the harmonious integration of new participants” in activities.

Source, Africanews, 2nd January 2024


Weak Kenya shilling boon for neighbour economies

Potato traders wait for traders for the valuable commodity outside Mwariro Market located along Ring Road in Nairobi, Kenya on April 11, 2023. PHOTO | FRANCIS NDERITU | NMG

As Kenyans continue to struggle with high unemployment levels, rising cost of living and faltering businesses, traders importing good from their market were all smiles as the falling shilling assured them better deals.

The Kenya shilling lost roughly 16.7 percent against the Uganda shilling since June 2023, driven by surging appreciation of the US dollar against it, and a wave of market correction among financial traders concerned about the latter’s overvalued position in the forex market.

The dollar has strongly rallied against the Kenya shilling for nearly six months —a development that saw the greenback rise from an average exchange rate of Ksh125 against in the first quarter of 2023 to a record high of Ksh155 posted in November.

On the other hand, the Uganda shilling has held steady against the Kenya currency, posting an average sell rate of Ush25 since July, compared with Ush30 recorded in January 2023. This trend has translated into notable currency gains for local importers but also raised questions about spill-over benefits for Ugandan customers.

“Some products in the Kenyan market have been discounted as well, because of low consumer demand. Though we have realised strong financial savings from this situation, I’ve told my fellow traders to put those savings aside for a rainy day instead of passing them on to customers straight away. It is always easy to cut product prices during good times, but it is very difficult raising prices in a tough economic situation.”

Buying dollars in Uganda

Mr Wadada said businesspeople from Kenya, Tanzania and Rwanda are expected to flock to Uganda to buy dollars in January because of the scarcity in the region, and this may cause fresh depreciation pressures against the Uganda shilling and potentially wipe out the savings realised by local importers.

“Nonetheless, stable fuel supply patterns between Uganda and Kenya of late have helped maximise some of the currency savings enjoyed by Ugandan importers who buy goods regularly from Kenya,” Wadada added.

Read: Ugandans flock to Kenya for holiday shopping

The high taxation and living costs experienced in Kenya have also impacted Kenyan citizens living in neighbouring countries.

30pc drop

“Anyone who lives in Uganda and is paid in Kenya shillings is losing about 30 percent of their pay in currency depreciation-related costs. But those of us that earn in either Uganda shillings or US dollars and live in Uganda are fairly shielded from that problem,” said John Chihi, a Kenyan professional working in Kampala.

“Those selling real estate in Kenya but live in Uganda are also likely to lose about 30 percent of their money through currency depreciation costs if they choose to value their property in Kenya shillings.”

“The combination of big price increases on various items sold in Kenya and currency depreciation have raised the cost of living for everyone. I used to spend about Ksh5,000 ($32) on my son’s upkeep per week, but I now spend Ksh12, 000 ($77.8) per week, because of various product increases and tax increments applied on many goods and services in Kenya today,” Mr Chihi added.

In Tanzania, cross-border traders in fresh food, especially in the north, say the weakening of the Kenyan currency has impacted their business.

The Bank of Tanzania (BoT) foreign exchange rates published on December 14, 2023 showed the Kenyan shilling exchanging at 16.2 to the Tanzania shilling, from the previous Tsh22 earlier in the year.

Economics lecturer at the University of Dar es Salaam Prof Humphrey Moshi said the supply and demand chains between Kenya and Tanzania would be affected by the weakening Kenyan currency. Shared essential services such as education and health have also become expensive for both Kenyans and Tanzanians.

Zanzibar President Dr Hussein Mwinyi was quoted in an officla statement saying the value of trade between the two nations in 2022 had reached $800 million.

“Due to the good relationship and co-operation that exists, our two countries have also been able to benefit economically, especially in the fields of trade and investment,” he said.

Source: The East African, 31st December 2023


Traders gamble on Africa’s ‘Wild West’ Eurobond market

Africa’s Eurobonds present a complex narrative of both success and caution. offering significant development finance but demanding prudent management.


Image : DisobeyArt / Adobe Stock

In the ever-changing African Eurobond market, Cyprus-based trader Simbarashe Jindu briefly pauses amid a busy trading day. Despite challenges posed by the 2020 pandemic and recent global political shifts, the secondary market for buying and selling African debt remains strong. It’s fuelled by Eurobond issuances from African governments and corporations, drawing in an international mix of brokers, traders, and asset managers. The market reacts quickly to information or speculation, often sparking swift trade surges to capitalise on opportunities or to reduce potential losses.“For lack of a better phrase, it can be like the Wild West,” says Jindu.

“It’s not a place where most people trade, because sub-Saharan Africa (SSA) is one of the more volatile spaces in the Eurobond market. But it attracts those looking for higher yields, as compared to other emerging market (EM) papers like Saudi Arabia, yields in SSA are 3% higher and more.”

Traders in African debt focus on the “spread” – the yield difference between these bonds and a benchmark, often US Treasury bonds. This metric is critical, spotlighting the perceived risk and potential return of investing in African debt versus the more stable, lower-yield US bonds. A wider spread indicates higher risk with possibilities of larger returns, while a narrower spread suggests lower risk and more modest returns.

“Some bonds are oversubscribed or underbought even during defaults. Such anomalies signal when a bond is trading much higher or lower than expected. By examining these specific bonds, traders can anticipate higher trading values post-restructuring. Ghana is trading low 40s to the dollar, but post restructuring those bonds might trade as much as 50, so that’s just a risk you’re taking,” says Jindu.

As global central banks begin to ease off their tightening cycles, a resurgence of interest in bonds is noticeable as borrowing costs lesson. Yet, formidable challenges persist, and the door to new issuance has remained shut for sub-Saharan Africa throughout 2023. Constrained by high interest rates, foreign exchange volatility, and persistent inflation, only Egypt and Morocco, habitual issuers in North Africa, have managed to raise global capital from the continent this year.

Eurobonds offer governments flexibility – in comparison to the decades of conditional loans – but they come with steep costs, high yields (5% to 18%), and shorter maturities, typically around 10 years.

This financial structure poses sustainability issues, with countries including Nigeria, Kenya, Angola, Egypt, and Ghana allocating a substantial portion of their tax revenues to interest repayments. In Nigeria, over 80% of federal revenue is consumed by debt repayments, a trend the IMF expects to reach nearly 100% by 2026.

Investor enthusiasm

Since South Africa’s inaugural Eurobond issuance in 1995, the African Eurobond market has witnessed profound growth, with participation from over 21 countries by 2023. This expansion mirrors the continent’s urgent demand for capital to fuel infrastructure development and manage essential imports. As of the third quarter of 2023, the face value of African sovereign Eurobonds stood at $142bn, with a market value of approximately $125bn, illustrating the market’s robustness, says Gregory Smith, author of Where Credit Is Due, and lead economist at the World Bank.

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The market’s allure is further emphasised by investor enthusiasm. A survey conducted by The Value Exchange indicates that 76% of asset managers plan to increase their investments in African debt. This strong interest highlights the potential of the continent’s financial instruments.

Yet Africa’s Eurobonds present a complex narrative of both success and caution. While countries like Zambia and Ghana face ever-present challenges due to the misuse of capital amid global economic slowdowns and commodity price crashes, others like Rwanda demonstrate the positive impact these financial tools can have when managed effectively.

Rwanda’s inaugural Eurobond issuance in 2013, totalling a modest $400m, stands as a testament to fiscal responsibility, says Smith. This represented about 5.1% of its GDP at the time, a figure that has since declined to around 3% of its 2023 GDP, owing to the country’s steady economic growth.

The success of this bond is attributed to its transparent allocation of funds, with significant portions invested in the Kigali Convention Centre, RwandAir, and the Nyabarongo hydropower project. Despite global economic challenges, these projects have flourished, contributing to Rwanda’s infrastructure and economic development.

“There are a lot of lessons to be learned from this first round of borrowing from the continent,” Smith tells African Business. “My view is this hasn’t been a mistake, but accessing the markets has got to be done better. There are some countries who have borrowed too much like Ghana, which tapped the Eurobond market too heavily. And for others they didn’t align the use of proceeds to invest in specific projects.”

In 2021, Rwanda continued to show its adeptness in the market by issuing a second Eurobond for $620m at a lower interest rate, using part of the proceeds to refinance the initial bond, a strategic move that demonstrated the country’s growing sophistication in debt management.

The lessons from Rwanda’s experience are clear. Eurobonds, while offering significant development finance, demand prudent management. Missteps during times of crisis can lead to crippling debt, worsening credit ratings, and rising interest rates, potentially foreclosing future Eurobond issuances.

The story of Mozambique’s 2013 “tuna bond” serves as a stark reminder of the risks involved. Never paying a single coupon and eventually declared illegal, this bond, which was supposed to finance a tuna fishing fleet, led to a massive increase in the nation’s public debt – from less than 50% of GDP in 2013 to 140% by 2016. The situation was worsened by undisclosed government borrowing and graft. Today, Mozambique’s remaining Eurobond, maturing in 2031, has seen its coupon rate balloon from 5% to 9%, adding heavy weight to the annual interest burden.

Alternative funding sources

Now, with African countries confronting challenges in debt markets, some are actively seeking alternative funding sources.

Innovative financing methods, including social impact bonds, green bonds, and diaspora bonds, are being explored. This strategic shift aims to diversify funding mechanisms and reduce Eurobond dependency.

“I think some sovereigns are pivoting away or are having a pause from the Eurobond market, as they will have to do things a bit differently, maximising concessional lending, and for others it’s lesson is to use the markets a bit more widely and rethink the strategy,” says Smith.

“For those who haven’t got large maturities coming they can quite easily sit this one out and wait for the weather to change. If you have large maturities coming then you are going to have to come back to the markets or conjure up a plan B, and that’s what Kenya’s doing right now.”

Approaching the debt wall

At the year’s close, the maturity “debt wall” looms large, presenting itself as an intimidating impediment to development, with Zambia, Egypt, Ethiopia, Ghana, Kenya, and Tunisia facing pressing repayments in 2024 and 2025, amid economic strife.

Zambia’s $4bn debt restructuring, hindered by November’s creditor disagreements, highlights the limitations of Lusaka’s declining options in debt refinancing, while the price of copper, their primary export, remains stubbornly low.

Egypt, burdened with a $100m repayment obligation, grapples with fiscal pressures, while Ethiopia navigates restructuring under the G20 Common Framework amidst civil war and pandemic fallout.

Ghana, in the throes of its worst economic crisis, works towards restructuring $13bn in Eurobond debt after defaulting.

Kenya faces a potential crunch in June 2024 with a $2bn Eurobond due, as the government scrambles for relief through fiscal moderation. Tunisia’s economic crisis is compounded by imminent Eurobond maturity and challenging IMF negotiations.

For some of Africa’s debt issuers, it can look as if their foray into global capital market access has been the case of one step forward, and two steps backwards, with a return to the crippling debt crisis they battled at the turn of the century.

But for Yvette Babb, an EM fixed income portfolio manager at William Blair, an investment bank and investment management firm, the forecasts for debt restructuring and the fundamental health of the market is broadly optimistic.

“If you look at the African Eurobond space at an index level, so taking the JP Morgan EM bond index (EMBI) global diversified African spread levels as an aggregate, they clearly are on the higher side from a five-year perspective,” she says.

“We foresee 2023’s challenges evolving into 2024’s opportunities, especially in fixed income asset classes. Countries with major external financing needs, like Egypt and Kenya, are likely to see reduced refinancing concerns, thanks to support from development partners, both multilateral and bilateral. And in the broader context, SSA presents a generally positive risk-reward balance – the high spreads now appear to sufficiently, sometimes even overly, compensate for the risks associated with these countries abilities and intentions to repay Eurobond debts,” says Babb.

The financial landscape, once characterised by low global rates and narrow spreads before 2020, has transitioned to a tighter regime, yet one unlikely to replicate 2023’s severe tightening in 2024, according to Babb. This shift alleviates concerns over imminent debt maturities but highlights the necessity for structural changes in financing strategies. Anticipating more expensive commercial financing, these countries are now tasked with re-evaluating their borrowing approaches and costs, confronting limited access to commercial bond markets and escalating concerns about debt sustainability.

Despite these challenges, the continent’s trajectory isn’t solely defined by impending austerity. “We’ve seen remarkable growth and social progress in Africa over the last two decades, driven by reform and investment, with Eurobond markets playing a significant role,” says Smith.

Will McBain

Will is an award-winning documentary filmmaker and journalist based between the UK and West Africa.

Source:  African Business,  December 1st, 2023