The Economist Intelligence Unit has projected that lower borrowing costs in the coming year will drive an increase in Eurobond issuance across the West African region.
This forecast was part of the EIU’s Financial Services Outlook 2025, titled The Great Easing, which was recently released.
The report noted, “Falling interest rates will boost fixed-income markets and securities and the fund managers that handle these assets. Falling yields and, consequently, higher bond prices should lead to a bond market rally, making fixed income more attractive after years of underperformance. High-quality fixed income, including investment-grade corporate bonds, mortgage-backed securities, and emerging-market sovereign debt, are expected to offer strong returns. Rate cuts in 2025 will also propel bond flows to emerging markets, reversing the outflows triggered by rate rises in recent years.”
It further highlighted that lower borrowing costs in emerging and developing economies would spur more Eurobond issuance, particularly in regions like West Africa, where there was an uptick in issuance early in 2024.
“In the securities market, equities will be supported by earnings-driven growth, particularly in the US. Despite the limited potential for valuation expansion, earnings in US stocks should rise between the middle and end of the rate-cutting cycle.”
Additionally, the EIU predicts that digital wallets will emerge as the fastest-growing method for instant payments globally, while the use of cash will continue to decline as payment innovations accelerate.
The report also mentioned that both global and national regulators would raise their climate finance targets in 2025, with the World Bank aiming to increase the climate finance component of its total financing to 45 percent in the coming year.
The European Central Bank will continue with its 2024-2025 climate and nature plan, monitoring banks’ integration of climate risks into their frameworks.
Large financial services companies in India will be required to comply with the climate risk disclosure plan in the 2025-2026 financial year.
In late November, Nigeria made a successful return to the international bond market after a two-year break, raising $2.2 billion through 6.5-year and 10-year Eurobonds.
This issuance was oversubscribed, with demand exceeding $9.0 billion.
Minister of Finance and Coordinating Minister of the Economy, Mr. Olawale Edun, commented on the successful pricing, saying it marked a step toward increased investor confidence in the ongoing efforts of the President Bola Ahmed Tinubu administration to stabilize Nigeria’s economy and foster sustainable, inclusive growth for all Nigerians.
“The broad range of investor appetite to invest in our Eurobonds is encouraging as we continue to diversify our funding sources and deepen our engagement with the international capital markets,” Edun said.
Governor of the Central Bank of Nigeria, Olayemi Cardoso, also expressed optimism, stating, “This outcome underscores the growing confidence of investors and the resilience of the Nigeria credit and evidence of our improved liquidity position and continued access to international markets to support the financing needs of the government.”
Director-General of the Debt Management Office, Patience Oniha, noted the significance of the Notes’ pricing. “With the successful pricing of the Notes on an intraday basis, Nigeria has registered a landmark achievement in the international capital market. The size of the order book was approximately 4.18x the offer amount, and the strong and diverse investor base helped to price the new 6.5-year at 9.625 percent, while new 10-year notes were priced at 10.375 percent. The DMO remains committed to maintaining transparency and open communication with investors and stakeholders and appreciates the continued confidence and support of the international and Nigerian investors who participated in the pricing.”
Beyond Nigeria, other African nations are also tapping into the international debt market.
Ivory Coast, Benin Republic, and Kenya collectively issued $4.85 billion in Eurobonds during the first quarter of 2024, with these offerings being oversubscribed, demonstrating renewed investor interest in riskier frontier market debt.
Senegal became the fourth sub-Saharan African nation to enter the Eurobond market this year, raising $750 million in debt maturing in 2031.
