Ecobank Nigeria’s bond sale displays African corporate debt markets open up for business

Africa’s very first non-sovereign bond of 2021 displays that prospective clients for Nigeria’s economic development can pull in investors, Ecobank Nigeria controlling director Patrick Akinwuntan tells The Africa Report.

The lender previous week priced its $300m London-mentioned bond maturing in February 2026. The challenge was more than 3 situations oversubscribed and drew “significant” worldwide desire, states Akinwuntan.

“The power and depth of the ebook demonstrated international investors’ robust hunger for the Ecobank franchise in Nigeria.”

The sale exhibits that appetite for company African debt has survived the Zambia sovereign debt default in November 2020.

Ecobank Nigeria is the biggest single-nation operation of the Ecobank Team, which operates in 33 African nations around the world.

The Africa Continental Free of charge Trade Settlement (AfCFTA), which arrived into effect at the begin of January, provides Ecobank the option to become a Nigerian chief for pan-Africa and world-wide trade and payments, claims Akinwuntan.

Bond bounty

The bond will be utilised to offer “stable medium-term funding for our pan-Africa and international trade transactions,” he says. “Our issuance shows that effective African corporates can increase resources by means of the intercontinental bond industry.”

• Many African currencies are weak in comparison to Western currencies, so yields need to a great deal be larger to catch the attention of global buyers, suggests Akinwuntan.
• The produce of 7.125% signifies the least expensive at any time generate obtained by a Nigerian economical establishment for a benchmark bond transaction, he provides.
• Ecobank selected London for the bond as its offers “access to a broader distribute of global investors,” explains Akinwuntan.
• Nonetheless, personal debt marketplaces in Africa are “gradually enhancing, and we feel the capacity to finance money owed of this magnitude is obtainable.”

Oil recovery restrictions negative loans

Ratings agency Fitch has a B- issuer rating on the Ecobank Nigeria bond, and Akinwuntan claims this demonstrates its expectation that “capitalisation will keep on being resilient,” over the next 12 to 18 months, with the bank “maintaining adequate buffers above the bare minimum regulatory requirements”.

Fitch suggests that close to 22% of the bank’s oil and gas publicity was impaired at the stop of the third quarter.

Nonetheless, the agency states that a gradual recovery in oil selling prices and financial activity will prevent financial loan losses from escalating considerably this 12 months.

The agency expects Ecobank Nigeria to continue to be financially rewarding this year.

Awesome surprise

Nigeria’s financial system amazed on the upside by exiting recession in the fourth quarter. An improve of GDP of .1% for the year was a sharp rebound from the contraction of 3.6% in the 3rd quarter.

Akinwuntan is bullish on the broader potential customers for African company and sovereign bonds. He sees a sequence of factors that make African debt appealing:

•  A fast growing populace and middle classes
• Chances for diversification, industrialisation and included-price processing across sectors and countries
• Untapped normal resources and uncultivated agricultural land
• Possible growth in countrywide and regional source chains as world corporates look for to diversify their sources to decrease possibility.

Ecobank Nigeria is also planning to start the Ellevate programme, built for firms which are led by or centered on females.

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The bank’s business arm is allocating 10% of its mortgage portfolio to women’s corporations. The programme will supply loans with favourable curiosity premiums and diminished collateral requirements, says Akinwuntan.

Base line

Powerful African corporates can raise cash at aggressive charges on intercontinental marketplaces all through the Covid-19 pandemic.