Benin’s return to the WAEMU debt market on September 12 was a relative success, securing lower yields than other major issuers in the region despite a high-interest-rate environment. This comes after the BCEAO kept its key interest rates unchanged due to inflation concerns.

After being off on the regional financial market for a few weeks, Benin returned on September 12, raising CFA21.99 billion (about $37.3 million) through treasury bills and bonds. The country wanted to raise CFA20 billion, marking its second issuance this year for 1-year bills and the third and fourth issuances for 3-year and 5-year bonds, respectively. Despite strong demand (total bids reached CFA31.86 billion), Benin only accepted 69% of the offers.

This amount was secured amid rising yields demanded by West African investors. However, Benin managed to keep its yields lower than Côte d'Ivoire, which recently issued debt at higher rates.

Benin’s yields were competitive compared to its neighbors, especially for longer-term bonds. The weighted average rate for 1-year treasury bills was 6.81%, 6.57% for 3-year bonds, and 7.15% for 5-year bonds. In contrast, Côte d'Ivoire, which raised funds two days earlier, saw its yields exceed 7.60% for both 3-year and 5-year bonds. Specifically, Ivorian bonds yielded 7.62% for 3 years and 7.64% for 5 years. Senegal, which entered the market a day after Benin, saw its 182-day (6-month) treasury bills yield 6.98%, already higher than Benin’s 1-year bill rate.

“Benin’s yields remain attractive compared to other countries in the region, likely due to a more favorable perception of its credit profile,” explained an Abidjan-based economist. Benin’s Treasury also rejected overly expensive bids, particularly for the 1-year notes, accepting only 41.9% of the proposals. This demonstrates the authorities' determination to resist the pressure of high market rates.

Benin has also significantly reduced its market borrowing since 2023, as investors continue to demand higher risk premiums. This trend was further reinforced by Benin's Eurobond issuance earlier this year. In February, Benin successfully raised $750 million in Eurobonds, strengthening its position in international markets. Despite a challenging economic environment, Moody's and Fitch recently maintained Benin's credit rating.

On the macroeconomic front, the outlook remains strong. The International Monetary Fund (IMF) expects Benin’s economic growth to remain positive in 2024, driven by structural reforms and increased public investment.

However, Benin’s return to the market comes amid tight budget conditions, with CFA65 billion in debt service due in September 2024, followed by nearly CFA24 billion in October. To manage these upcoming payments, Benin focused on 3- and 5-year bonds, which offered more favorable terms, accepting all bids for the 5-year bonds, totaling CFA12.12 billion.

“The full acceptance of the 5-year bonds shows Benin is looking to secure medium-term financing to better manage short-term debt pressures,” a financial analyst commented.