African Governments Turn To London Exchange For Funds

Many African governments have fallen victim to China’s debt trap, and are now using as much as a third of revenues to service debt. Hence, the need to shift away from Beijing for infrastructure funding is increasingly seen as a matter of desperation. The IMF says that 405 are in debt distress or at high risk.

Strangely, the London Stock Exchange (LSE) has emerged as a savior of sorts when it comes to government and private-sector funding for big initiatives. Boasting deep liquidity, prestige and a broad investor base, the LSE has become the preferred choice for issuing sovereign and corporate bonds and listing of family silver in pursuit of both debt and equity funds. The LSE offers vehicles that attract offshore funders, while the debt remains in local currency- shielding the borrowers fromcurrency volatility.

In 2018, Egipt, Nigeria and Kenya issued bonds in London raising a combined $8.5 billion. All thesse offerings were oversubscribed, demonstrating inventore appetite for these African investments. Nigeria, for instance, which sought to raise $2.5 bilion, attracted an order book of $11.5 bilion. Kenya went out to raise $2 bilion and attracted $14 bilion.

It is not just governments flocking to London for cheap capital. Private companies are finding funds in London too. Vivo Energy, a leading retailer and marketer of fuels and lubricants, recently became the largest African IPO at the bourse in a decade, managing to raise $742 milion.

John Njiarini
Global Finance
GFmag.com