Thursday, 31 January 2013

IFC's foray into African capital markets

THE INTERNATIONAL Finance Corporation, the private sector arm of the World Bank, has launched its foray into Africa’s capital markets. It will begin by issuing a US$50 million equivalent bond in the Nigeria Securities Exchange. Next in line will be Kenya which said to have issued the necessary approvals.

Kenya and Nigeria are among the 10 securities exchange targeted for IFC’s Pan-African Domestic Medium-Term Note Programme. Other countries targeted include Botswana, Ghana, Kenya, Namibia, Rwanda, South Africa, Uganda, and Zambia.

 The programme will see IFC issue local currency bonds in the targeted countries to support the local private sector and also the capital market, says a statement from IFC. While the domestic capital markets are excited about IFC’s foray, they are concerned at the small amounts it is issuing. “US$50 million in the Nigeria market is not even a drop in the ocean,” say analysts.

 It is not clear what the size of the Kenyan issue will be. However, it could be in the same region as the Nigerian issue US$50million. IFC’s entry into any market raises its profile among investors and fund managers leading to more foreign activity in the local markets. IFC, said a Kenyan Banker in whose bank IFC is an investor,” is a confidence builder. If it invests in your stock, other investor follow suit.” 

Consequently, the markets are excited and are seeing even increased activity in anticipation of IFC’s entry.
Stock market players in Kenya agree saying IFC’s entry into the market is a vote of confidence in the market.  Stock brokers in Nairobi say IFC’s entry will raise NSE’s profile among skeptics in West. Africa whose bond market is generally small is likely to witness a huge influx as countries issue infrastructure bonds to finance their huge infrastructure programmes.  
Kenya has already floated More Kshs 100 billion (US$1.2 billion) infrastructure bonds