Economy
Impact of COVID-19 on Debt Capital Markets in Africa
Traditionally, corporates and states in Africa use debt capital markets to raise huge funding. As the coronavirus bites harder against the increasing debt-to-GDP ratios coupled with increasing risks in African countries, the pricing of new issuances in the international debt capital markets became relatively unattractive.
Consequently, African governments turned to other concessionary sources like the International Monetary Fund (IMF), World Bank and Development Finance Institutions for funding.
Africa’s depiction of the international debt capital markets is dominated by sovereign issuances. While its debt capital markets offer investors better returns than in developed markets, its domestic markets remain shallow and least diversified compared to other emerging and frontier markets. Also, African corporates are less likely to raise substantial amounts of funding via debt capital markets due to various reasons including lack of depth in the domestic markets and institutional weaknesses.
Between 2014 and 2018, sovereign bonds accounted for 51.5 per cent of the total $140.3 billion raised from 437 international bond transactions in Africa. Within 2016 and 2018, African issuers raised about $120 billion of non-local currency debt which further culminated to $245.9 billion of non-local currency debt from 759 issues within the last decade. The largest sovereign issuer of non-local currency debt in 2019 was Egypt raising $8.2 billion. Next to Egypt is South Africa which raised $5 billion in September of the same year from its largest-ever Eurobond issuance.
However, in 2020, the effect of COVID-19 impacted the African economy resulting in a pullback from African markets as countries faced crisis on all levels including health and social services. These unprecedented shocks call for a temporary debt standstill for all African countries as economic fundamentals deteriorated. A 2020 study on the economic impact of COVID-19 by the African Union (AU) showed that while countries in Africa could lose up to $500 billion, they may be forced to borrow heavily to survive after the pandemic, hence the need for the debt standstill—suspension of debt service.
For example, Mozambique’s debt overtook its overall economic output as its debt-to-GDP ratio, which was 100 per cent in 2018 billowed to 130 per cent in 2020; even as the country struggles to repay its $14 billion external debt. Asides from Mozambique, there are other poor and highly indebted African countries with little fiscal space to provide a robust response and recovery from the pandemic. Some of these countries like Angola, Djibouti, Congo, Cabo Verde, and Egypt have a higher than 100 per cent external debt-to-GDP ratio, yet, they still seek more funds.
Consequently, the G-20 agreed to suspend debt repayment for the world’s 75 poorest countries until the end of 2020. UN Secretary-General António Guterres further advised that debt suspension should be extended to all developing countries, while the UN Economic Commission for Africa (ECA) recommended a complete temporary debt standstill for two years for all African countries, without exception.
Over the years, there have been calls by multilateral institutions for debt forgiveness for Africa’s most impoverished states. However, some experts opine that such cancellation or debt standstill would be perceived as a default in today realities of the international capital markets and will greatly compromise the future access of African countries to international markets. For example, states like Benin and Ghana which were able to access capital markets over the past year at 5.75 per cent for 7 years (€500 million) and 8.875 per cent for 40 years ($750 million) respectively might find it difficult to do so if they are perceived to be in default. On the other hand, perception of default would likely also be priced into future borrowings by African countries.
Following the above, in April 2020, China, which accounts for most of the lending to African countries through its China Development Bank and the Export-Import Bank of China, expressed a willingness to provide Africa debt relief, but not forgiveness. In June, China offered to cancel Africa’s interest-free loans, which is less than 5 per cent of Africa’s debt to China, based on bilateral negotiations.
With the already rising value of the total public debts in many African countries, to combat the prevailing crisis of the coronavirus, some African countries opted for multilateral financing. One of such countries is Nigeria. The country, in the second quarter of 2020, requested $6.9 billion of multilateral financing from the International Monetary Fund (IMF), World Bank and African Development Bank (AfDB) to minimise the impact of the upsurge of the global pandemic.
Source: NBS
Part of these funds was to establish a $1.2 billion COVID-19 crisis intervention fund to upgrade healthcare facilities across the country and to provide intervention funds to the 36 states including the Federal Capital Territory (FCT).
Similarly, against the backdrop of the pandemic, the African Union launched several programmes, like the African Union Development Agency (AUDA-NEPAD) COVID-19 Response Plan to help countries fight the pandemic and recover better. Using Nigeria as a case study, activities in the domestic bond market significantly increased year-on-year given the relatively low yields in the market. In H1 2020, seven corporate bond issuances were raised to the tune of N152.7 billion compared to N54 billion raised in three issuances in the corresponding period of the previous year.
According to the data by the Debt Management Office (DMO), the nation’s debt stock data at the third quarter (Q3) 2020 showed that the total public debt portfolio of the federal and state government combined stood at N32.22 trillion ($84.57 billion), an increase of 22.9 per cent but a decrease of 1 per cent in dollar equivalent due to the different exchange rate values within the periods.
Nigeria’s total public debt showed that $31.99 billion (or 37.82 per cent of the debt) was external while $52.59 billion (or 62.18 per cent of the debt) was domestic. Further disaggregation of Nigeria’s foreign debt showed that $16.74 billion of the debt was multilateral; $502.38 million was bilateral (AFD) and another $3.26 billion bilateral from the Exim Bank of China, JICA, India, and KFW while $11.17 billion was commercial which are Eurobonds and Diaspora Bonds.
The debt conundrum leaves Africa in a dilemma considering the rising budget deficits coupled with the need to fund the deficits. If Africa is to stop depending on donors and multilateral funds to finance its economic development, it needs to evolve towards market-based financing for the quantum of financing required. In addition, African countries need to promote market-friendly policies that will attract capital to underserved sectors and allow the states to focus its limited financing on priority sectors such as education, health, and social services.
By Aduragbemi Omiyale
The presidential candidate of the Labour Party in the 2023 general elections, Mr Peter Obi, has expressed worry over plans by the administration of President Bola Tinubu to spend about $11.6 billion on debt servicing.
In a post on his social media platform on Monday, the opposition politician criticised this move, saying it is not good for the country.
He also said this action “should concern anyone interested in the country’s economic future and long-term development.”
The former Governor of Anambra State kicked against the penchant of the government to borrow from various sources without anything to show for it.
“There is nothing inherently wrong with borrowing when it is guided by prudence and directed toward productive investment, he noted, stressing that countries such as Japan, the United Kingdom, the United States, the United Arab Emirates, Singapore, and Indonesia are all heavily indebted, yet their borrowings are largely channelled into education, healthcare, infrastructure, and innovation – sectors that generate long-term economic returns and sustain repayment capacity.”
According to him, “despite high debt levels, their obligations remain more manageable because they are tied to measurable productivity.”
He said, “Nigeria’s situation, however, is markedly different. A huge proportion of past borrowing has been directed toward consumption, with limited visible or sustainable developmental outcomes to justify the scale of indebtedness.”
“It is also important to note that a huge portion of the debt currently being serviced was accumulated under the Tinubu administration itself, while borrowing has continued at a significant pace. The administration’s recent external borrowing alone includes about $6 billion (from First Abu Dhabi Bank in the UAE—$5 billion, and UK Export Finance via Citibank London—$1 billion), a further $1.25 billion under consideration from the World Bank, and an additional $516 million arranged through Deutsche Bank, bringing the latest known external loan commitments to roughly $7.8 billion. In addition, domestic borrowing through monthly bond issuances continues to add to the overall debt stock,” the businessman also stated.
“Against this backdrop, Nigeria’s 2026 budget shows that health is N2.46 trillion, education is N2.56 trillion, and poverty alleviation is N865 billion, giving a combined total of about N5.885 trillion for these three critical sectors.
“By comparison, debt servicing at about $11.6 billion (approximately N17–N18 trillion, depending on exchange rate assumptions) is almost three times higher than the total allocation to health, education, and social protection combined. This imbalance highlights a troubling fiscal reality in which debt obligations increasingly crowd out investment in human capital and poverty reduction.
“Moreover, even within the limited allocations to these sectors, funds may not be fully released, and a significant portion of what is eventually released could be misappropriated,” he further stated.
Mr Obi said, “The central issue is not borrowing itself, but whether borrowed funds are being converted into measurable productivity, inclusive growth, and improved living standards. Without this, debt servicing shifts from being a temporary fiscal obligation to a long-term structural burden that constrains development and deepens economic vulnerability.”
By Adedapo Adesanya
Pathway Advisors Limited, an issuing house and financial advisory firm, has announced the successful completion of the Series 2 Commercial Paper issuance for Veritasi Homes & Properties Plc.
The Series 2 offer, issued under Veritasi Homes’ newly registered N20.00 billion Commercial Paper Programme, raised N16.76 billion, significantly above its initial N12.00 billion target on the back of strong institutional demand.
This issuance builds on the company’s track record in the Nigerian debt capital market and follows the recently concluded N10 billion 3-year 20 per cent Series 1 Fixed Rate Bond Issuance, further reinforcing investor confidence in Veritasi Homes’ strong credit profile.
The 364-day tenor instrument attracted robust participation from a diverse pool of institutional investors, underscoring sustained confidence in the Company’s financial strength, operating model, and governance standards.
Commenting on the deal, the Founder/CEO of Pathway Advisors Limited, Mr Adekunle Alade (MBA, FCA, M.CIod), noted that the outcome further validates investor appetite for well-structured transactions in the Nigerian capital market.
“The strong oversubscription speaks to the market’s confidence in Veritasi Homes’ performance, governance, and repayment track record. We are pleased to continue supporting issuers with strong fundamentals in accessing efficient funding.’’
He further highlighted that Veritasi Homes’ consistent market activities since 2022, including successful issuances and full redemption of matured obligations, continue to strengthen its reputation among institutional investors.
“Pathway Advisors Limited remains committed to maintaining its leadership position within Nigeria’s capital markets through the origination and execution of transformative, value-driven, and commercially viable transactions by deploying innovative financial solutions and facilitating strategic capital formation across critical sectors.
“We are committed to supporting credible corporates in accessing efficient short-term and long-term financing solutions within the Nigerian capital market,” he said in a statement on Monday.
Speaking on the transaction, the Managing Director/CEO of Veritasi Homes & Properties Plc, Mr Nola Adetola, described the outcome as a strong endorsement of the company’s fundamentals.
“This result reflects the resilience of our business model, our growing market reputation, and the continued trust of the investment community. We are grateful to all institutional investors for their confidence in Veritasi Homes.”
He added that the proceeds from the issuance will be deployed to support the company’s working capital requirements, enhance liquidity, and complete the ongoing development activities across its real estate portfolio.
Mr Adetola also commended Pathway Advisors Limited for its advisory and arranging role in the successful execution of the transaction.
By Aduragbemi Omiyale
The Securities and Exchange Commission (SEC) has approved the transition to the T+1 settlement cycle for capital market transactions from June 1, 2026.
This is coming some months after Nigeria moved from the T+3 settlement cycle to the T+2 settlement cycle.
The T+ settlement cycle is the number of working days required to complete a capital market transaction, such as the trading of securities, shares, and others, from the first day the trade was executed by an investor.
In a notice on Monday, the SEC, which is the apex capital market regulator in Nigeria, said it was authorising the new system to “promote an efficient, fair, and transparent capital market.”
Under the new arrangement, equities and commodities traded by investors at the market would be cleared and settled by the Central Securities Clearing System (CSCS) within one day.
The agency noted that the migration to a T+1 settlement cycle forms part of its ongoing market modernisation initiatives aimed at enhancing market efficiency and strengthening risk management. reducing counterparty exposure, improving liquidity, and aligning the Nigerian capital market with international standards and global best practices.
“Accordingly, all eligible trades executed in the Nigerian capital market shall settle one business day after the trade date (T+1),” a part of the statement noted.
It was stressed that “Friday, May 29, 2026, shall be the final trading day under the existing T+2 settlement cycle. Trades executed on Friday, May 29, 2026, and Monday, June 1, 2026, shall both settle on Tuesday, June 2, 2026. All trades executed from Monday, June 1, 2026, onward shall be subject to the T+1 settlement cycle.”
SEC tasked all capital market operators, securities exchanges, clearing and settlement infrastructure providers, custodians, registrars, issuers, and other relevant stakeholders to take all necessary measures to ensure full operational readiness and compliance with the new settlement framework.
“Market participants are expected to review and align their systems, processes, controls, and operational workflows ahead of the implementation date,” it further stated, promising to continue to engage stakeholders and monitor the implementation process to ensure an orderly and seamless transition.
The regulator said it remains committed to strengthening market integrity, enhancing investor confidence, and fostering the development of a modern. resilient and globally competitive Nigerian capital market.
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