The effect of COVID-19 on the African economy has created a pullback from African markets and temporary debt halt for all African countries.
According to economic experts, this may leave Nigeria and several other African countries in a dilemma considering the rising budget deficits coupled with the need to find them.
FBNQuest,in a report titled, “The impact of COVID-19 on the Debt Capital Markets in Africa” released yesterday, said corporates and states in Africa use debt capital markets to raise huge funding and with the impact of COVID-19 against the increasing debt-to-GDP ratios coupled with increasing risks in African countries, the pricing of new issuances in the international debt capital markets became relatively unattractive.
The research-based firm noted that due to the situation, African governments turned to other concessionary sources like the International Monetary Fund (IMF), World Bank and Development Finance Institutions for funding in 2020.
“Africa’s depiction of the international debt capital markets is dominated by sovereign issuances while its debt capital markets offer investors better returns than in developed markets, its domestic markets remain shallow and least diversified compared to other emerging and frontier markets.
Also, African corporates are less likely to raise substantial amounts of funding via debt capital markets for various reasons including lack of depth in the domestic markets and institutional weaknesses”, they said.