Senegal’s Bonds Rally as President Rules Out Bid for Third Term

Senegalese international bonds rallied as investors welcomed President Macky Sall’s decision to rule out a third term for himself, a move that is likely to reduce risks of protests ahead of next year’s elections.

(Bloomberg) — Senegalese international bonds rallied as investors welcomed President Macky Sall’s decision to rule out a third term for himself, a move that is likely to reduce risks of protests ahead of next year’s elections.

Yields on Senegal’s euro and dollar-denominated debt fell at least 25 basis points to the lowest levels since February. The bonds are now some of the best performers among emerging-market peers this year.

Sall’s announcement brings an end to a heated controversy over his eligibility to stand, lowering the chances of disruption from opposition supporters who rejected an extension of his tenure. It also marks the start of a race to succeed the leader of one of Africa’s fastest-growing economies, on the cusp of becoming an oil and gas producer.

“The 2019 term was my second and last term,” Sall, 61, said in a televised address to the nation in the capital, Dakar, on Monday. “That’s what I said before and that’s my decision tonight.”

Read more: Why Normally Stable Senegal Is Wracked by Unrest: QuickTake



Yields on euro bonds maturing in 2037 fell 25 basis points to 9.66%, while 2033 dollar rates fell 27 basis points to 8.53%. Yields have already been trending lower since March, helped by a $1.8 billion loan approval from the International Monetary Fund.

The nation’s debt has notched up returns of 5.8% in dollar terms so far this year, compared with the 4% average return for peers in a Bloomberg emerging and frontier credit index, with Sall’s move providing a fresh spur.

“The announcement is risk positive, as a third term run by Mr. Sall would have triggered more protests,” Oxford Economics Africa Lead Political Analyst Francois Conradie said in a research note on Tuesday.

Growth Boost

The expected start of oil and gas output may lift Senegal’s economic expansion to 8.3% this year, the fastest on the continent after Libya, according to the IMF. The Washington-based lender approved loans for the country last month to support its recovery and protect it from future shocks.

Gas output will start later this year from the $4.8 billion Grand Tortue Ahmeyim field, which straddles the waters offshore Senegal and Mauritania. Crude production from the $4.2 billion Sangomar project, developed by Australia’s Woodside Energy Group, is also expected to begin in 2023.

Senegal has a reputation for upholding democratic rules, particularly compared with turbulent West African neighbors including Mali and Guinea.

“President Sall’s clear statement sets an example for the region, in contrast to those who seek to erode respect for democratic principles, including term limits,” US Secretary of State Antony Blinken said in a statement on Tuesday.

Election Contenders

Senegal’s ruling Benno Bokk Yakaar coalition has yet to nominate a presidential candidate. They will have the edge in the February vote as opposition leader Ousmane Sonko faces disqualification after being convicted of “corrupting youth” and sentenced to two years in prison.

The main challengers are expected to emerge by August, when candidates are required to submit signatures from at least 0.8% of voters to show they have support.

Among the contenders to succeed Sall is Idrissa Seck, the runner up in Senegal’s 2019 election, who stepped down from a government role in April. Seck is “a creature of the centre-right and appeals to business,” Conradie said.

Two other potential candidates — former Dakar Mayor Khalifa Sall, and Karim Wade, the son of a former president — could regain eligibility to stand in 2024 after a political commission that was appointed by Sall said it was in favor of changing the electoral law. Wade and Sall were disqualified from the 2019 vote after they were handed jail sentences for embezzlement and corruption respectively.

Sall came to power in 2012, riding a wave of popular discontent after then-President Abdoulaye Wade sought an unconstitutional third term.

“I will continue to devote all my strength to defend the constitutional institutions of the republic, respect for court decisions, territorial integrity, protection of persons and property,” Sall said. “I will stay by your side, listening to you, at the service of the republic and the nation.”

–With assistance from Colleen Goko and Alister Bull.

(Updates throughout with market moves.)

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