The increasing dynamism of the Sub-Saharan African economy coupled with the continent’s large financing needs have led Sub- Saharan African countries to consider alternative sources of external funding to finance their local development. Traditionally, Sub-Saharan African countries have recourse to classical forms of external financing such as multilateral and bilateral financing, commercial bank loans and/or other private sources of investment due in part to their quite limited access to global financial markets.1 Since the last decade, however, there has been a surge for Sub- Saharan African countries in global financial markets with Eurobond issuances by countries such as Congo, Gabon, Ghana and Nigeria in 2007 and followed by a number of other countries after the pause imposed by the recent global financial crisis.

This trend has been driven by changes in both African sovereigns and investors factors. Indeed, prospects for growth in emerging economies coupled with the slow economic growth of advanced countries since the 2007 financial crisis has impacted international investors’ investment strategy, who are looking for higher yielding investments and are willing to diversify their portfolio. Yet, the increasing interest of international investors for bonds issued by African sovereigns are limited to issuance made on international markets due to the lack of political stability and regulatory framework of domestic capital markets. There is indeed a preference for bonds issued on traditional trusted locations which offer established regulatory and legal frameworks as well as lower risk for investors. International financial markets are indeed a good alternative source of financing for sovereigns when domestic resources are inadequate or insufficient and have been used by Sub-Saharan African countries for various reasons, ranging from debt restructuring to financing of local infrastructure projects. Though the prospects for inaugural bond issuances on international markets are quite high,2 international bond issuances by Sub-Saharan African countries are still at an early stage and we thought it would be useful to analyse this new form of financing for Sub-Saharan African countries which, we anticipate, would certainly raise a number of challenges and issues that local governments would have to face. At this stage, the biggest challenge for existing and prospective issuing States is to ensure that such alternative form of financing is a real opportunity for the continent and to adopt internal measures to manage efficiently the proceeds of bonds issuance to ensure that it actually serves local development and internal growth.

Originally published in ICLG TO: Lending And Secured Finance 2015.