EIU Anticipates Surge In Eurobond Issuance For 2025

EIU Anticipates Surge In Eurobond Issuance For 2025

The Economist Intelligence Unit (EIU) forecasts that reduced borrowing costs will stimulate an increase in Eurobond issuance in the West African region come the New Year…READ MORE…

This insight was shared in EIU’s recently released Financial Services Outlook 2025 report, titled ‘The Great Easing.’

The report states, “Declining interest rates will revitalize fixed-income markets and securities, benefiting fund managers responsible for these assets. A decline in yields will lead to higher bond prices, generating a rally in the bond market that makes fixed income more appealing after years of underperformance. High-quality fixed income, such as investment-grade corporate bonds, mortgage-backed securities, and emerging-market sovereign debt, is expected to deliver robust returns. Anticipated rate cuts in 2025 will also redirect bond flows towards emerging markets, reversing the outflows that resulted from previous rate hikes.”

“Emerging and developing economies will see lower borrowing costs, prompting more Eurobond issuance, particularly in West Africa, where issuance increased in early 2024. Equities in the securities market are expected to gain support from earnings-driven growth, particularly in the United States, although the potential for valuation expansion remains limited,” the report added.

Additionally, EIU predicts that digital wallets will become the fastest-growing instant payment method globally, while cash usage will continue to decline as payment innovations evolve.

Global and local regulators are expected to escalate their climate finance targets in 2025. The World Bank plans to raise the climate finance portion of its overall financing to 45 percent. The European Central Bank is set to carry out its climate and nature plan for 2024-25, which will involve evaluating banks’ progress in integrating climate risks into their operational frameworks. Moreover, major financial services firms in India will need to comply with a climate risk disclosure plan in the 2025-26 financial year.

In late November, Nigeria re-entered the international bond market after a two-year absence to secure funds for its 2024 budget, raising $2.2 billion through 6.5-year and 10-year Eurobonds, with demand exceeding $9.0 billion.

Following this successful pricing, Finance Minister and Coordinating Minister of the Economy, Mr. Olawale Edun, mentioned that this development reflects growing confidence in the efforts of President Bola Ahmed Tinubu’s administration to stabilize the Nigerian economy and promote sustainable, inclusive growth for all Nigerians.

“The broad interest from various investors in our Eurobonds is promising as we strive to diversify our funding sources and enhance our engagement with international capital markets,” he stated.

According to Central Bank of Nigeria Governor Olayemi Cardoso, “This outcome highlights the increasing confidence of investors and the resilience of Nigeria’s credit profile, demonstrating our improved liquidity position and continued access to international markets to meet government financing needs.”

Patience Oniha, Director-General of the Debt Management Office, commented on the pricing of the Notes, stating, “With the successful pricing of the Notes within a single day, Nigeria has achieved a significant milestone in the international capital market. The order book totaled approximately 4.18 times the offered amount, and the diverse investor base allowed us to price the new 6.5-year bond at 9.625 percent, while the new 10-year notes were set at 10.375 percent. The DMO is committed to maintaining transparency and open communication with investors and stakeholders and appreciates the ongoing trust and support from both international and Nigerian investors.”

Beyond Nigeria, several African nations are also tapping into the international debt market. In the first quarter of 2024, Ivory Coast, Benin Republic, and Kenya collectively issued $4.85 billion in Eurobonds, showcasing resurgent investor demand for riskier frontier market debt. Senegal joined this trend as the fourth sub-Saharan African country to access the Eurobond market this year, raising $750 million in debt maturing in 2031.

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