Now appears to be good time to hit the Eurobond market

The current low global interest rate environment is making Eurobonds much more compelling to African governments.  Zambia launched a US$1 billion Eurobond in early April, albeit at 300 basis points (bps) wider than its inaugural Eurobond in October 2012.  Ghana, however, has decided to put on hold plans to issue a $1 billion 10-year Eurobond.

Eurobond issues by the struggling West African nation have been the weakest performer of all sub-Saharan Africa Eurobonds since the fourth quarter of 2013.  Ghana’s performance is reflecting investor concerns about the government’s inability to control the fiscal deficit causing macro instability.

With Nigeria, the future looks much brighter as the country can now boast the largest economy in Africa (over 40 percent larger than South Africa’s) after a rebase of the country’s GDP data last month.  This position will on balance be positive for its current Eurobond performance and future issuance.

In terms of market conditions, this is probably a good time for emerging markets to sell Eurobonds.  The Eurobond market provides African countries with good enough fundamentals and an alternative source of long-term funding needed to address their huge infrastructure deficit.

From that point of view, it is a very positive development for African nations.  In many cases Eurobond financing will be cheaper than borrowing domestically and will provide longer- term financing.  Foreign borrowing also makes sense if the government is going to import capital goods for infrastructure.”