Sovereign bond: Nigeria issue takes Africa centre stage
Nigeria’s impending dollar sovereign bond comes at a time when demand for African sovereign paper exceeds supply. African states are cautious about entering the capital markets despite the many good reasons for issuance. Nick Kochan reports.
WHEN NIGERIA COMES to the market this month with a $500 million sovereign bond, investors will scramble to get in on the deal. The 10-year bond will be heavily oversubscribed as African credit moves from the fringe of the emerging market universe to dead centre.
Africa is flavour of the year. Fear of defaulting and unstable African states has been replaced by a clamour for credits that are seen as the most dynamic part of the frontier market. The demand will, in time, be met by states watching the market but so far lacking the confidence or credentials to sell their debt. African paper has a rarity value, says Standard Chartered’s head of capital markets for Africa, Ade Adebajo. "There is a growing appetite from emerging market funds for African debt, in recognition of its rarity value. The issues don’t happen that often, so when you see it, you grab it. Ghana and Gabon issued in 2007. We are now three years on, and they haven’t issued again."
The ranks of buyers are swelling as African credit is reassessed. This is no longer just the province of the emerging market experts. Now a broader range of investors want a piece of the action.