The difference in interest rates between Nigeria and WAEMU countries reflects how investors view their sovereign risk and economic stability. This highlights the ongoing weaknesses in Nigeria’s economy, which affect its ability to meet international payment obligations.

In its first return to the international capital markets (Eurobonds) in over two years, Nigeria announced it had raised up to $2.2 billion. The initial amount sought was $500 million, but the operation attracted subscriptions totaling about $9 billion, according to a statement from Nigeria’s Debt Management Office (DMO).

The institution highlighted the strong appeal of Nigerian bonds. “Today’s successful issuance signposts increasing confidence in ongoing efforts of the President Bola Ahmed Tinubu, GCFR, administration to stabilize the Nigerian economy and position it on the path of sustainable and inclusive growth for the benefit of all Nigerians. The broad range of investor appetite to invest in our Eurobonds is encouraging as we continue to diversify our funding sources and deepen our engagement with the international capital markets,” said Olawale Edun, Nigeria’s Finance Minister.

However, the interest rates on this borrowing remain relatively high when compared to those of countries in the West African Economic and Monetary Union (WAEMU) that also raised funds in the international market in 2024.

The $750 million loan issued by Benin in February 2024, maturing in 2038, carried an interest rate of 7.96%, with the current yield not exceeding 8%. Meanwhile, Côte d'Ivoire's $1.5 billion bond, issued in January 2024 with a 12-year maturity, currently has a yield of 8.27%. Finally, Senegal’s June 2024 bond had an interest rate of 7.75%.

These differences in rates reflect the perceived differences in sovereign risk and economic stability between Nigeria and the WAEMU countries. Investors require higher yields to compensate for the risks associated with Nigerian bonds. This situation underscores the ongoing weaknesses within Nigeria’s economy, which affect its ability to strengthen its domestic production, a crucial factor in reassuring the market about its capacity to meet international payments.

The year 2024 was forecasted to be a major year for Africa’s return to the international bond market, and the reality has confirmed this expectation. According to market data reviewed by the Ecofin Agency, over $18.3 billion has been raised by governments in the region through Eurobond issuances. With Nigeria’s recent operation, the 2024 total is already reaching $20.45 billion, nearly matching the 2021 total of $20.7 billion.