The volume of issues of corporate bonds in key Sub-Sahara Africa markets has recently picked up, and appetite among investors for SSA corporate bonds is strong, according to Fusion Group.

Michael Kimondo, Head of Treasury Operations at Fusion, said investors are in search of high yielding instruments, and portfolio diversification.

Domestic corporate bond markets in key Sub-Sahara markets such as Nigeria and Kenya have witnessed significant new issue activity in the last one year. 

“Kenya’s corporate bond issues, denominated in local currency, are yielding relatively high returns. This has led to oversubscription during offers,” he said.

Kimondo noted that in the case of Kenya corporate bond issues, investors are looking at locking in the high returns on offer, which have been in the range of 12-12.5% per annum, for medium term paper.

“Two companies in the financial sector have recently offered corporate bonds that recorded significant oversubscription. This has been taken to imply that there is high investor appetite for such offers. More companies are lining up to raise funds in Kenya through sale of corporate bonds,” he said.

With regard to Nigeria, Kimondo said that the local corporate bond market is very active with many issuers.
He noted that there is a trend where corporate bonds issuers in Sub-Sahara Africa are now looking to international markets as a source of capital with Nigerian companies being particularly active in this space.

“The recent success of sovereign bond issuance by SSA governments has spurred corporate entities from the region to tap international market. Companies in Nigeria have been at the forefront of this wave,” he said.

According to Fusion, Nigerian companies have issued a total of nine bonds to raise $3bn in the international markets in the last year, bringing total international issues by corporate entities currently outstanding to 14 that raised a total of $5bn.

“Majority of these corporate issuers are banks, which were raising funds to fund capital hungry infrastructural development, especially in mining and energy sectors,” said Kimondo.