Rates Scare: Nigeria, Other SSA Countries Shelve Eurobond Issuance

Rates Scare: Nigeria, Other SSA Countries Shelve Eurobond Issuance

Up till the final quarter of 2020, no countries in the Sub-Saharan African has returned to raise fund from the Eurobond market, a Fitch Ratings stated in a report.

This was partly due high rates and low productive activities in the year.

Specifically, Fitch said that many SSA sovereigns lost the ability to access markets at reasonable rates in March, but the situation has since stabilised with massive monetary and fiscal support in developed economies.

Some analysts believe that with pressure on government revenues, it is more likely to see some countries in the region to visit the Eurobond market in 2021.

Read Also: Outlook on Sub-Saharan Sovereigns is Negative – Fitch Ratings

Especially, countries whose existing Eurobond account is closing to maturity, as an example Nigerian with $500 million exposure expected to be settled in first quarter 2021.

In the next 10 years, Nigeria is expected to settle total sum of $8.418 billion Eurobonds exposures.

In a report, Fitch Ratings in a commentary said median gross domestic product (GDP) growth among sovereigns in sub-Saharan Africa will contract by 2.4% in 2020.

However, the Ratings firm hinted that growth is expected to recover to 4% in 2021 and 5% in 2022.

Explaining, Fitch said the contraction this year will be milder than in any other major region, but is still a steep fall relative to average growth of 3.8% in 2015-2019.

It noted that the rates of coronavirus infection and containment measures have been more limited in most of SSA than other parts of the world.

But the indirect effects on the economies in the region via reduced commodity prices and tourism, and tighter financing conditions have still led to a heavy impact on growth and ratings.

Recall that in 2020, Fitch downgraded seven of the 19 SSA rated sovereigns (Angola and Zambia twice).

Seven of the 19 sovereigns in the region are on negative outlook, while only one (Cote d’Ivoire) is on positive outlook and another five are rated below ‘B-‘, in which case Fitch does not assign an outlook, pointing to the risk of further downgrades.

Speaking to the outbreak of coronavirus, Fitch stated that many SSA sovereigns entered the crisis with high debt and weak external buffers.

It explained that this left the region more exposed to the pandemic’s hit to fiscal balances and external liquidity.

Read Also: Debt Distress Rising in Sub-Saharan Africa, says Fitch

“Median government debt at end-2019, at 56.5% of GDP, was almost 20 percentage point higher than five years before, and we expect a further rise to 72.8% by 2022 as a result of the shock”, Fitch said.

The Ratings concluded that many SSA sovereigns lost the ability to access markets at reasonable rates in March, but the situation has since stabilised with massive monetary and fiscal support in developed economies.

The rapid intervention of international financial institutions also helped to bring back confidence and supported liquidity, but no SSA sovereign has returned to issue internationally yet.