In a significant move, Cote d’Ivoire is poised to break the nearly two-year silence in sub-Saharan Africa’s Eurobond market, signaling a resurgence of investor confidence in the region.
President Alassane Ouattara announced in Abidjan that the world’s largest cocoa producer would issue a new Eurobond next week, making it the first country in the sub-Saharan African region to do so after a prolonged hiatus.
The President outlined the government’s commitment to the structural transformation of the Ivorian economy, with a focus on accelerating investments in key sectors such as digital technology and transport.
Additionally, he emphasized the exploitation of recent oil and gas discoveries, highlighting the nation’s forward-looking approach to economic development.
While the size of the upcoming Eurobond issue was not disclosed, Cote d’Ivoire is anticipated to be one of the fastest-growing economies in the region in 2024. The positive economic outlook is a testament to the country’s resilience and strategic initiatives despite the global economic challenges.
Following President Ouattara’s announcement, yields on the country’s existing Eurobond due July 2024 experienced a notable decrease, falling by 17 basis points on Monday to trade at 8.36%. This shift reflects a positive market response to the news of Cote d’Ivoire’s impending Eurobond issuance.
Søren Mørch, a portfolio manager at Danske Bank Asset Management, speculated on the potential details of the upcoming Eurobond. He suggested that Cote d’Ivoire would likely issue the bond in dollars with a 10-year tenor, aiming for a sale in the range of 8.50% to 8.75%. The estimated size of the issuance is expected to range between US$1 billion to US$1.25 billion.
As the nation prepares to tap into international capital markets, this development not only marks a crucial milestone for Cote d’Ivoire but also presents an opportunity for investors seeking exposure to the promising economic prospects of the region. The successful issuance of the Eurobond will likely set a positive precedent for other sub-Saharan African countries, opening avenues for economic growth and diversification.
Sub-Saharan Africa’s International Debt Market Freeze
The nations of sub-Saharan Africa find themselves navigating uncharted waters as they grapple with an effective lockout from international debt markets. This predicament stems from the aggressive interest rate hikes initiated by the US Federal Reserve in 2022 to combat rising inflation.
The consequence, a region-wide hiatus in international bond sales, echoing a scenario last witnessed in 2009 during the global financial crisis. The impact of the Federal Reserve’s interest rate policies has reverberated across sub-Saharan Africa, creating challenges for nations seeking to access international debt markets for capital.
The aggressive stance taken by the US central bank, driven by concerns over inflation, has created a global financial environment that poses hurdles for emerging economies, particularly those in sub-Saharan Africa.
This freeze in international bond sales marks a significant departure from the trajectory seen in recent years and highlights the vulnerability of the region to external economic forces.
Sub-Saharan African countries have traditionally looked to international debt markets to meet their financing needs and stimulate economic growth. The current impasse, reminiscent of the global financial crisis in 2009, underscores the severity of the challenges faced by these nations.
In 2009, amid the aftermath of the global financial crisis, sub-Saharan African countries endured a full year without a single international bond sale. Now, in 2022, a similar scenario is unfolding as the region contends with a prolonged absence from these crucial financial markets.
The parallel with the past serves as a stark reminder of the resilience required to navigate economic uncertainties and the importance of global economic interconnectedness.
As sub-Saharan African countries grapple with this international debt market freeze, policymakers and financial institutions are compelled to explore alternative strategies to sustain economic momentum. Domestic resource mobilization, innovative financing mechanisms, and strategic partnerships may become integral components of navigating these challenging times.
The road ahead remains uncertain, contingent on both global economic conditions and the ability of sub-Saharan African nations to implement effective economic policies. In the absence of international bond sales, the region faces the task of fortifying its economic foundations and seeking avenues for self-reliance to weather the current financial storm.