• African sovereign bonds gain 20.45% YTD, driving renewed investor demand and improved Eurobond market conditions.

• Key performers Ghana, Zambia, and Morocco post double-digit returns after restructurings and rating upgrades boost sentiment.

• Eurobond spreads narrow to 388 bps, lowest since 2019, as stable currencies and easing inflation support cheaper African debt.

According to data from S&P Dow Jones Indices, the S&P Africa Sovereign Bond Index recorded a 20.45% year-to-date total return as of October 3, 2025, exceeding returns from most other emerging and developed market peers. The performance indicates renewed appetite for African debt, supported by macroeconomic stabilization, easing global monetary policies, and improved credit outlooks.

Local sovereign bonds, issued in national currencies to finance government spending, have benefited from falling inflation and stable exchange rates. Rising bond prices and steady coupon payments have generated high returns, suggesting improved domestic conditions. This has influenced the pricing of Africa’s Eurobonds, as investors adjust risk perceptions and reduce the yield premiums demanded for holding African debt.

As a result, the difference between the initial coupon and current yield (spreads) on African Eurobonds has narrowed to levels last seen before the COVID-19 pandemic, as reported previously by Bloomberg. The Cbonds Africa Sovereign USD T-Spread Index shows an average differential of 388 basis points over U.S. Treasuries in early October, down from around 900 basis points in 2023. This tightening indicates that African borrowers can now access international markets at lower costs, reducing the burden of external debt servicing.

Ghana has emerged as one of the strongest performers, with returns exceeding 20% on local sovereign bonds. The country completed a $13 billion debt restructuring under the G20 Common Framework in early 2025, restoring investor access and improving market sentiment. The Ghanaian cedi has appreciated by more than 15% against the U.S. dollar since January, supporting returns for foreign investors. Zambia has posted similar results, following the completion of its $6.3 billion debt restructuring in June 2025. Rising copper prices, averaging close to $10,000 per ton, have strengthened government revenues and improved fiscal stability.

In North Africa, Morocco has maintained steady performance, supported by an investment-grade upgrade from S&P Global in March 2025. The country’s local bonds have delivered 15–18% YTD gains, attracting significant foreign inflows and reducing benchmark yields below 4%. Côte d’Ivoire and Senegal have also contributed to the region’s positive trend, posting returns above 15%. Both economies have benefited from substantial export revenues—cocoa for Côte d’Ivoire and phosphates for Senegal—and prudent fiscal management that has kept debt-to-GDP ratios below 60%.

South Africa has shown moderate gains of 8–10%, reflecting its larger and more mature bond market, while Kenya’s higher-yielding instruments have added volatility but supported regional averages. Overall, African sovereign bonds have outperformed the JPMorgan Emerging Markets Bond Index Global Diversified by 4–6 percentage points since January.

Improved Macroeconomic conditions

Macroeconomic conditions have supported this improvement. Inflation in major global economies has returned to target ranges of 2–3%, allowing African central banks to reduce interest rates. In Nigeria, the benchmark rate was cut from 26.25% to 24% in September. Several African currencies have strengthened, helping to contain imported inflation and stabilize local bond markets.

Commodity prices have also provided support. Crude oil remains near $80 per barrel, industrial metals have gained about 15% YTD, and agricultural exports continue to perform well. These developments have improved fiscal balances and strengthened external positions across many African economies.

The easing cycle of the U.S. Federal Reserve, which has implemented three rate cuts in 2025, has increased investor interest in higher-yielding emerging-market assets. African bonds offering returns of 7–9% have attracted inflows from global funds reallocating capital from developed markets with lower yields.

Credit rating agencies have reflected these improvements in their assessments. Nigeria received upgrades from Fitch and Moody’s to B-, citing higher oil revenues and fiscal consolidation. Ghana was removed from selective default status following its restructuring, and South Africa obtained a positive outlook after the formation of the Government of National Unity. According to Fitch Ratings, 2025 marks the first year since 2018 in which emerging-market upgrades have outnumbered downgrades.

Improved ratings have encouraged new Eurobond activity. By early October, 14 sovereign issuances across eight African countries had raised approximately $15.7 billion, a 25% increase compared with the same period in 2024. Sub-Saharan Africa accounted for about three-quarters of this total.

Morocco’s $3 billion Eurobond issued in the second quarter and Benin’s $700 million offering were both heavily oversubscribed. Angola returned to the market in July 2025 with a $1.5 billion Eurobond, its first since 2022, priced at a 9.5% yield, the lowest in six years. Other countries, including Nigeria and the Democratic Republic of Congo, are preparing new issues aimed at infrastructure financing and economic diversification.

Alongside traditional Eurobonds, sukuk (Islamic bonds) are gaining momentum. Since January, African issuers have increased sukuk issuance by about 35% year-on-year, tapping new pools of Sharia-compliant capital from the Gulf and Asia. Nigeria’s ₦300 billion ($190 million) domestic sukuk issued in May was oversubscribed sevenfold and will finance road infrastructure. Egypt and Algeria have also issued or announced new sukuks, with Algeria’s planned $2.3 billion debut expected in November.

While risks remain, including commodity price volatility and global rate uncertainty, the combination of strong local bond returns, lower Eurobond spreads, and rising investor demand marks a significant improvement in Africa’s debt market conditions. The convergence of these trends indicates that African sovereign bonds are regaining stability and credibility within the global fixed-income landscape.

Idriss Linge