The unusual 50 basis point interest rate cut by the United State Federal Reserve is expected to spur new debt issuance by African nations including Nigeria and Angola, according to BancTrust & Co.
The bold half-percentage-point cut in borrowing cost by the Jerome Powell-led Federal Open Market Committee has signalled an easing cycle of US monetary policy as inflation tapers off.
This is then expected to “likely drive market yields lower in the sub-Saharan Africa space, which would increase the attractiveness of the international capital market for issuers,” the London-based investment bank said in a research note on Wednesday.
This is even as Nigeria is expected to offer a Eurobond soon after the Fed’s decision, the emerging market investment bank added.
Africa’s biggest economy had been aiming to raise funds through Eurobond sales this year, according to Finance Minister Wale Edun to bolster government finances.
But the Eurobond fell through as uncertainty clouded its issuance.
The last time Africa’s most populous nation tapped the international debt market was in March 2022, when it raised $1.25 billion at a rate of 8.375 per cent through a seven-year Eurobond.
However, a successful Eurobond offering by Nigeria may lead financial institutions and companies such as Access Bank Plc, FBN Holdings Plc and SEPLAT Energy Plc to access debt international markets, BancTrust & Co said.
As Angola expects Eurobond sale, Kenya’s outlook appears uncertain
BancTrust & Co said Angola may likely follow the same trend of sale if yields at the mid-to-long-end of its curve move closer to 9 per cent, which is not too far from where most of the nation’s Eurobonds were priced at issuance.
The Southern African nation may also issue a debt-for-nature swap, the investment bank said.
Meanwhile, Kenya is unlikely to go to the international bond market in the near term because of “its own idiosyncratic risk” including high debt-servicing costs and foreign reserves being under pressure, the research note stated.
As a result, Kenya is likely “to rely on concessional financing until investor sentiment toward the William Ruto administration improves,” it said.
