Senegal has secured $750 million in debt through bond sales as investors’ confidence in the nation’s economy surged.

Senegal is the fourth sub-Saharan African nation to tap into the bond market this year, suggesting a renewed sense of stability and economic promise.

The bond, which matures in 2031, was issued in two tranches at a coupon rate of 7.75%. Initially, $500 million was sold on Monday with an additional $250 million on Tuesday.

According to data compiled by Bloomberg, JPMorgan Chase & Co. acted as the lead manager for the bond issuance. A spokesman for Senegal’s Treasury confirmed the total amount raised.

The successful bond sale marks a notable turnaround for Senegal, which faced considerable uncertainty earlier this year.

Former President Macky Sall had postponed the elections originally scheduled for February, prompting widespread protests and raising concerns about political instability.

However, the situation stabilized when Sall conceded to public pressure and held the vote in March.

The election saw opposition leader Bassirou Diomaye Faye triumph over Sall’s chosen successor. Faye’s victory brought initial unease regarding his policy direction, but market sentiment has since improved.

According to Samir Gadio, head of Africa strategy at Standard Chartered Bank, market uncertainty has significantly moderated post-election, though some risk premium persists.

“This market comeback by Senegal was unexpected so soon, even though investors generally felt the country could be a candidate for a new issuance,” Gadio remarked, emphasizing the surprise and optimism surrounding the bond sale.

The proceeds from this bond issuance are expected to bolster Senegal’s financial reserves, providing a buffer for potential additional financing needs.

This includes the repayment of $162.9 million on a bond maturing in July, which is a crucial step in maintaining fiscal stability.

Economic projections from the International Monetary Fund (IMF) are optimistic about Senegal’s future.

The IMF anticipates the country’s budget shortfall will decrease to 3.1% of GDP in 2024 from 3.9% last year.

The commencement of oil and gas production later this year is expected to significantly boost economic growth, potentially doubling the growth rate to 8.3%.

Moreover, the IMF forecasts a decline in Senegal’s debt-to-GDP ratio, from 79.6% last year to 72.5% in 2024. This reduction follows increased borrowing to finance stakes in oil projects and election preparations.

Senegal’s successful bond issuance comes in the wake of other sub-Saharan African nations re-entering the international capital markets.

Ivory Coast led the way with a $2.6 billion eurobond sale in January, followed by Benin and Kenya, which raised $750 million and $1.5 billion, respectively.

The positive reception of Senegal’s bond sale signals a broader investor confidence in the country’s political and economic trajectory under Faye’s leadership.

With the anticipated start of oil and gas production, Senegal is poised for substantial economic growth, making it an attractive prospect for investors seeking stability and returns in emerging markets.

Subscription for the Federal Government bond auction on May 13, 2024 was the lowest so far in 2024.

Despite the subdued interest, the government successfully raised N380.76 billion, albeit experiencing a 39 per cent reduction compared to the proceeds from the previous month’s auction.

The aggregate subscription across all tenors amounted to N551.316 billion, representing a decrease from the N920.08 billion recorded in the preceding month.

The Debt Management Office (DMO) reported a non-competitive allotment of N301.30 billion.

The auction featured various bond tenors with the new 9-year bond taking center stage. This bond attracted substantial interest, garnering N373.875 billion in subscriptions.

Of this amount, N285.124 billion was allotted, inclusive of N179.00 billion under non-competitive bids.

The bids ranged from 16.95 per cent to 22.00 per cent, eventually settling at a marginal rate of 19.89 per cent.

Meanwhile, the 7-year bond received bids totaling N76.875 billion, with N62.975 billion allotted. Non-competitive allotments accounted for N85.80 billion.

The bids ranged from 17.20 per cent to 20.80 per cent, resulting in a final marginal rate of 19.74 per cent.

In addition, the 5-year bond attracted bids amounting to N100.56 billion, with an allotment of N32.67 billion.

An additional N36.500 billion was allocated through non-competitive bids. Bids spanned from 17.50 per cent to 21.00 per cent, and the marginal rate was set at 19.29 per cent.

The subdued subscription level in May 2024 indicates a lack of robust investor participation in government bonds compared to previous auctions.

This decline in investor interest could be attributed to various factors, including prevailing market conditions, economic uncertainties, and evolving investment preferences.

The landscape of sustainable investment in Africa is experiencing a significant upswing as the issuance of Environmental, Social, and Governance (ESG) bonds by African entities hit $4.4 billion in 2024.

This substantial increase highlights a growing commitment among African institutions to raise funds for investments aligned with ESG principles.

The surge in ESG bond issuance underscores a broader trend towards responsible and sustainable investing on the continent.

The African Development Bank (AfDB) emerges as a key player in this segment, having successfully issued social bonds worth $2 billion in January 2024, in addition to hybrid sustainable bonds amounting to $750 million.

Joining the AfDB in this endeavor is the Arab Bank for Economic Development in Africa (BADEA), which, with the support of the African Export-Import Bank, has issued bonds totaling €500 million.

This momentum in the ESG bond market has propelled financial institutions like BNP Paribas, JPMorgan, and Bank of America Securities into leading positions as arrangers for such bonds on the continent.

The surge in ESG bond issuance reflects a broader global trend towards sustainable finance, with the total value of emissions of this kind expected to reach $950 billion in 2024, according to Moody’s.

It is evident that ESG bonds are gaining traction in Africa, supported by development finance institutions and initiatives aimed at fostering sustainable economic growth and development across the continent.