Nigeria’s to benefit from AfDB’s AUD$600m Australian kangaroo social bond
● Largest ever benefactor’s trade issued in Africa ● Bonds target social issues: electricity, WASH, flood-risk reduction, employment
NIGERIA’S $470 BILLION economy, which is making a slow recovery from its second recession in five years, stands a good chance to benefit from the largely lucrative but unharnessed Australian bond market, as the African Development Bank (AfDB) launches a AUD$600 million (Australian dollar) 5.5-year Kangaroo social bond.
A Kangaroo bond is a foreign bond issued in the Australian market by non-Australian firms, and is denominated in Australian currency. The bond is subject to the securities regulations of Australia. A Kangaroo bond is also known as a “matilda bond.”
The bond is the first ever and largest Australian social bond launched on the African continent. The amount (A$600 million) is equivalent to $463.9 million, marking AfDB’s return to the Australian dollar bond market.
With the transaction led by Nomura and RBC Capital markets, it is the institution’s first benchmark Kangaroo since early 2018, and its first in the mid-curve since 2015.
It is also the largest AUD trade ever issued bond by the AfDB. More than 30 investors participated in the deal, with a total order book of more than A$775 million, leading to an upsize of the trade from the announced size of A$250-300 million to the final size of A$600 million. These included a strong cohort of Australian investors, while fund managers were the major investor type.
ADB’s treasurer, Hassatou N’sele said the Covid-19 pandemic had led to a rise in global issuances of social bonds. “Following on from the ground-breaking $3.1 billion 3-year ‘Fight Covid-19’ Social Bond we issued in 2020, we are glad to see that public domestic markets, like the Kangaroo bond market, are now seeing similar development in terms of interest from dedicated ESG investors, which provided additional momentum enabling us to print the largest trade we have ever done in AUD,” N’sele said.
The ADB’s social bonds have use of proceeds allocated to projects that alleviate or mitigate social issues such as improving access to electricity, water and sanitation, and improving livelihoods through flood-risk reduction and access to clean transportation and employment generation.
The Australian dollar (AUD) is the fifth currency in which the AfDB has issued social bonds since it established the program in 2017, following deals in euros, US dollars, Norwegian kroner and Swedish kronor.
In December 2016, the panAfrican financial bank launched its inaugural Kangaroo Green Bond. This transaction followed successful outings in USD and SEK Benchmark formats.
Development experts, while advising Nigeria to buy into the social bond, adduce that the nation can activate the bond from the country ‘down under’ with a healthy economy, to improve its much-harried social services sector.
Recent data show that the AfDB had A$1.75 billion of bonds mature between its 2015 benchmark deal and its most recent. Keith Werner, manager of capital markets and financial operations, said 38 per cent of investors in the deal had a socially responsible investment approach and that the bank intends to issue more social bonds in Australian dollars.
“In addition to the important contribution that socially responsible investors had to the success of this trade, it’s also gratifying to see such a large portion of the investors (41%) were domestic, which is an area where we haven’t seen strong support historically. We look forward to leveraging this momentum and continue evaluating opportunities in the future in this market”, Werner said.