Some financial analysts have predicted that Eurobonds from sub-Saharan Africa will perform better this year, even though debt levels in some parts of the region are ballooning.
A survey by some experts and market observers, last week, showed that this year would be a better year, but opinion was split on which country would dominate the overall improvement.
“It is likely that African Eurobonds will offer better returns this year after a negative performance in 2018,” Head, Africa strategy at Standard Chartered, Samir Gadio, said.
Meanwhile, the United States Federal Reserve, last week, also signaled that its three-year drive to tighten monetary policy might be at an end amid a suddenly cloudy outlook for the US economy, an announcement that could support investor interest in Africa’s debt market.
Nigeria’s 30-year $460-million Eurobond, issued in November as part of a $750-million fundraising, currently yields a healthy 8.169 per cent. In a positive sign for the region, investment bank JP Morgan raised its exposure to emerging market local bonds and currencies after the Fed shifted to a more dovish stance.
Top African crude exporters like Nigeria and Angola have suffered in recent years from oil price weakness that has curbed into much-needed revenues and exposed weaknesses at state-owned companies.
The poll listed Angola, Nigeria and even heavily-indebted Zambia as places to look for value in 2019 after a year of disappointing returns for net oil exporters compared with importers on the continent.
Nigeria raised $2.86-billion in Eurobonds three months ago to help fund its budget deficit, in a sale that was three times oversubscribed.
Angola, Africa’s second-largest crude producer is sizing up a shot at the bond market after securing an International Monetary Fund deal.
Oil prices averaged just over $100 per barrel in the first half of the past decade but fell to half of that from mid-2014.
Analysts said African Eurobonds had already posted impressive returns early this year and were generally performing better than other emerging markets.
But even if US-China trade talks yield positive results and better risk sentiment, Gadio warned that tighter spreads and supply pressure could constrain bond gains later this year.
“Investors will likely look for pockets of relative value in countries that still trade relatively wide to immediate peers and/or have room to outperform. This appears to include Nigeria, Cote d’Ivoire and Cameroon,” Gadio said.
