The lion’s share of debt
S&P Global Ratings expects that sub-Saharan African (SSA) sovereign commercial debt will reach the $323 billion level by the end of this year while including concessional debt, the outstanding size will be around $446 billion.
Of the gross $43 billion in long-term commercial debt that S&P expects 17 sub-Saharan African nations to raise in 2017, a staggering 82% will be raised by three nations – Angola, South Africa, and Nigeria – in that order. However, except for Nigeria, the gross borrowing for the other two nations is expected to be lower than in 2016.
Data from S&P Global Ratings showed that Angola is projected to surpass South Africa to become the region’s biggest borrower for 2017. However, even though South Africa is projected to witness a decrease in borrowing, it will remain the largest biggest borrower in the region.
Foreign currency exposure
S&P Global Ratings noted that “the majority of SSA sovereigns have around 50%-70% foreign currency debt to total debt.” However, the case of Nigeria and South Africa is different. They only have 26% and 11% of their total debt denominated in foreign currency “highlighting their relatively deep domestic capital markets compared with the rest of SSA.”
This relatively low percentage of foreign currency denominated debt makes Nigeria and South Africa less exposed to adverse movement in the dollar vis-à-vis their domestic units naira and rand, respectively. S&P noted that this can impact the overall borrowing figures which have been presented in US dollars.
On its part, the firm expects the dollar (UUP) to strengthen against both the naira and the rand, thus reducing the stated borrowing numbers.
Countries expected to borrow internationally
Among the 17 countries from sub-Saharan Africa analyzed, S&P Global Ratings informed that only three – Mozambique, South Africa, and Ghana – approached international bond markets in 2016. The firm expects this trend to continue in 2017. However, it noted that “Nigeria is confirmed to tap the international market in the near future.“
Nigeria is expected to conduct an asset sale, apart from tapping international markets later this year.
In the next article, let’s see what lies in store for international investors when it comes to SSA debt.
