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Senegal Eurobonds Plummet as Presidential Elections Postponed Indefinitely

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The bond market in Senegal witnessed a significant downturn as the government indefinitely postponed the much-anticipated presidential elections, triggering a wave of uncertainty and investor concern.

The decision made by President Macky Sall, led to a sharp decline in Senegal’s eurobonds reflecting the growing apprehension among investors about the country’s political stability.

Senegal’s dollar-denominated bonds due in 2033 experienced a substantial 3.6% drop, plummeting to 83.77 cents on the dollar while the 2037 debt saw an even more pronounced decline of 4.7%, falling to 69.84 cents.

This decline marks the first time Senegal has postponed an election, signaling a departure from its reputation as one of Africa’s more politically stable democracies.

The postponement decision followed clashes between opposition supporters and law enforcement in the streets of Dakar, resulting in the arrest of several officials, including former Prime Minister Aminata Touré and presidential candidate Anta Babacar Ngom.

The government’s decision to cut off mobile internet access compounded the situation, citing the dissemination of “hateful and subversive” messages that threatened public order.

Analysts and investors expressed concerns about the heightened political uncertainty in Senegal, with Barclays Plc analyst Michael Kafe warning of potential additional premiums on investment risks.

The delay in elections and the subsequent unrest have raised doubts about Senegal’s previously positive trajectory, with investors now wary of the country’s political and economic future.

Senegal, on the brink of becoming a significant player in the oil and gas sector, faces mounting challenges as it grapples with internal political tensions and investor skepticism.

The postponement casts a shadow over the nation’s democratic process and economic prospects, underscoring the need for swift resolution and stability.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Bonds

Federal Government Falls Short: Raises N1.5tn at February Bond Auction

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The Federal Government’s February bond auction fell short of its target as it raised N1.5 trillion instead of the planned N2.5 trillion.

The Debt Management Office (DMO) announced this shortfall in a press release on Tuesday. The auction included bonds maturing in 2031 and 2034, with a combined offering of N2.5 trillion.

Despite the lower-than-expected outcome, the DMO highlighted significant investor interest with total bids reaching N1.9 trillion, the highest recorded in any single FGN Securities Auction.

The 2031 bond received allotments totaling N873.53 billion, while the 2034 bond saw allotments amounting to N621.38 billion, making for a total allotment of N1.495 trillion.

The government’s decision to raise funds through bonds reflects its ongoing efforts to meet financing needs and attract both local and foreign investors.

However, the shortfall indicates a potential mismatch between the government’s funding requirements and investor appetite.

While the auction outcome signifies continued investor confidence in Nigerian securities, it also underscores the importance of closely monitoring government borrowing and fiscal management strategies to ensure sustainable debt levels and investor trust in the market.

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Federal Government Targets N2.5tn in Second FGN Bonds Auction of 2024

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In its second Federal Government of Nigeria (FGN) bonds auction of 2024, the Federal Government aims to raise N2.5 trillion.

The Debt Management Office (DMO) announced this in a circular released on Wednesday.

The auction consists of two tranches: N1.25 trillion with a maturity date of February 2031 and another N1.25 trillion with a 10-year tenor.

FGN bonds are integral to the domestic borrowing strategy of the Federal Government, forming a significant part of its fiscal policy.

Last year, the government raised approximately N7.06 trillion from the fixed-income market, indicating a reliance on debt instruments to finance budgetary requirements.

The government’s borrowing plan for 2024 forecasts new borrowings to hit N7.83 trillion, reflecting ongoing fiscal challenges and the need for capital injection into critical sectors.

President Bola Tinubu previously sought National Assembly approval for external borrowings totaling about $8.69 billion and €100 million for the period spanning 2022 to 2024.

The latest FGN bonds have a face value of N1,000, and their interest payments are typically semi-annual.

The auction underscores Nigeria’s ongoing efforts to manage its fiscal obligations while addressing the nation’s developmental needs amidst evolving economic conditions and debt dynamics.

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East African Bond Exchange Set to Revolutionize Kenya’s Debt Market

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The upcoming launch of the East African Bond Exchange (EABX) heralds a transformative era for Kenya’s debt market and promises enhanced liquidity, transparency, and growth opportunities.

Terrence Adembesa, CEO of EABX, envisions exponential development in Kenya’s bond market, which currently lags behind international standards in terms of size and activity.

Kenya, boasting the third-largest economy in sub-Saharan Africa, sees corporate debt issuance at a mere 0.2% of its GDP, a fraction compared to Asian economies where it ranges between 20% to 30%.

EABX aims to address this gap by providing a platform for efficient trading of government domestic debt and facilitating improved pricing mechanisms.

With the potential to trade three to four times the existing 5 trillion shillings ($31 billion) of outstanding liabilities, EABX holds promise for invigorating the Kenyan debt market.

It seeks to empower issuers with better pricing strategies while providing investors with enhanced visibility and cost savings.

The exchange, scheduled to commence operations in the first half of the year, received bids totaling approximately 2.6 billion shillings, surpassing its 2 billion shillings target.

The Kenya Bankers Association and UK-backed development agency FSD Africa collectively hold a majority stake of 52% in EABX, signifying strong support and confidence in its potential impact.

EABX’s roots trace back to 2009 when the Bond Market Association initiated efforts to establish a self-regulatory organization for the fixed income market.

As EABX prepares for its debut, it aspires to extend its footprint beyond Kenya, facilitating trading in fixed-income securities across East African Community member nations, including Tanzania, Uganda, Rwanda, Burundi, Democratic Republic of Congo, South Sudan, and Somalia.

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