Ecobanks Global Bond Milestone

Ecobank gains access to global capital markets just as Africa's economic recovery from the pandemic is about to begin.

Ecobank Transnational, the pan-African banking conglomerate, acquired a big new investor base last month with a $300 million bond offering on the London Stock Exchange by its Nigerian subsidiary. The deal, which carries a 7.1% coupon rate, gives Ecobank access to global capital markets at a propitious moment: recovery from Covid-19.

“This transaction is the first nonsovereign bond from Africa in 2021 and is a milestone capital-raise for the banking sector in Nigeria,” the bank said in a release. “For international investors, it represented an attractive option to gain exposure to Nigeria.”

Fitch Ratings assigned a B- rating on the Ecobank coupon, which has a maturity date of 2026. It noted some downsides, among them “the constraint of Nigeria’s challenging operating environment” and Ecobank’s weak profitability, modest core capital buffers, and “very high impaired loan ratio.” These are balanced out, Fitch said, by a solid funding profile, good foreign-currency liquidity, and “ordinary support from Ecobank Group,” which has operations in 33 African countries.

The Ecobank Nigeria debt offering is also a sure way for the bank to raise US-dollar medium-term funding, says Busola Jeje, banks analyst at Tellimer, an emerging markets investment advisory. “The rise in oil prices, as well as the hunt globally for high-yielding instruments, have contributed to the attractiveness of—to a broader extent—Nigerian corporate eurobonds,” she says. “It is not uncommon for Ecobank Nigeria to seize this opportunity to raise foreign capital, given the better market conditions.”

Part of the proceeds, Ecobank Nigeria says, will be used to support its international trade services and cross-border payment solutions. With the World Bank predicting that the African Continental Free Trade Area will boost the continent’s income by $450 billion by 2035, Jeje sees Ecobank Nigeria positioning itself to tap into opportunities for regional trade integration through linkages with other Ecobank subsidiaries.

“While Ecobank’s capital-raise might not in itself point to a start of multiple capital raising by other banks,” she says, “the current conditions in the international market seem favorable for more eurobond issuances compared to 2020.”