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The African Development Bank (AfDB) has announced the expansion of its family of African sovereign bond indices, known as the AfDB/AFMISM Bloomberg® African Bond Index (ABABI), with the addition of Mauritius and Morocco. In a statement released on Monday, the bank said the addition of the two countries marks a steady progress in its efforts to deepen Africa's local currency bond markets.

AfDB launched the composite index in February 2015 in collaboration with Bloomberg. The index is part of the bank's African Financial Markets Initiative (AFMI) aimed at supporting domestic resource mobilisation and bond market development on the continent. According to the bank, the AFMI strives to create an environment where African countries can access financing at variable terms.   

Four sovereign indices – Bloomberg Nigeria, South Africa, Egypt and Kenya – were part of the index at launch, followed by Botswana and Namibia in October 2015. Ghana and Zambia joined in April 2017.

The admission of Mauritius and Morocco into the ABABI is with effect from January 1, 2021, according to AfDB. The composite index, calculated by Bloomberg Indices, will now comprise of 10 African economies, considered the most liquid sovereign bond markets on the continent. The index helps in deepening Africa’s local currency bond markets by providing transparent and credible benchmark indices.

“This is a positive development as the inclusion of Mauritius and Morocco, two of Africa’s better-rated issuers, will improve the overall credit quality of the ABABI, which now captures close to 90% of the outstanding amount of African sovereign local currency bonds,” said Stefan Nalletamby, Director of AfDB’s Financial Sector Development Department.

Nalletamby noted that given the current environment where African nations are facing economic shocks caused by the COVID-19 pandemic, the ABABI indices are a reliable tool for international investors to measure and track the performance of African sovereign bond markets.

"This will be even more relevant following the COVID-19 crisis as sovereign debt managers, who will need to further diversify their local currency funding instruments, will also need to adjust their strategies, enhance transparency and widen their fixed income investor base, given the increased financing needs of the economies,” the AfDB Director said.

The AfDB comprises of 54 regional and 27 non-regional member countries. Ireland became the 81st shareholder of the bank in April 2020. Nigeria is the AfDB’s largest shareholder with active portfolio of about $5 billion as of December 2019.