In its first-ever dollar-denominated bond issuance, the Benin Republic has achieved a significant milestone, as it recorded a subscription of $5 billion, even as the country raised only $750 million from the issuance.
The oversubscription, amounting to $4.25 billion underscores strong investor confidence in the country’s macroeconomic prospects.
According to the country’s Finance Minister, Romuald Wadagni, proceeds from the 14-year bonds which were issued at a rate of 8.375% would be used to finance the country’s 2024 budget.
The bond sale by Benin Republic comes two weeks after Ivory Coast raised $2.6 billion in its oversubscribed Eurobond auction. With the yield rates of the Benin bonds being almost the same as some of Ivory Coast’s bonds in the international bond market, the phenomenon has puzzled some experts.
- Simon Quijano-Evans, the Chief Economist of the London-based asset manager, Gemcorp Capital Management, noted to some of their clients, “Who would have thought that Benin would be able to issue its debut USD external bond at a yield flat to or even below what an equivalent Ivory Coast USD bond was trading at earlier today?”
What you should know
Benin Republic, one of the fastest-growing economies in Sub-Saharan Africa is projected to hit an average GDP growth of 6.4% in the 2024-25 period. The country has displayed an impressive level of macroeconomic stability, as it posted an inflation of 0.40% in December 2023, up from –0.20% recorded in November 2023.
In July 2022, the IMF approved an Extended Fund Facility and Extended Credit Facility totalling $638 million for the Benin Republic. In October 2023, the IMF’s team visited the Benin Republic for the third review of the program.
After the visit, the IMF team lead for the review, Constant Lokeng, said,
- “Performance under the programme is strong – all quantitative targets for the end of June 2023 have been met, with fiscal consolidation underway. The authorities have mobilized additional concessional fiscal support, which will make it possible to use the flexibility provided for in the program, including a somewhat higher level of fiscal deficit.”