West Africa in Focus /

West Africa junta leaders cave in to civilian rule, avoid sanctions

  • ECOWAS members voted to lift economic and financial sanctions on Mali, which had led to default on over US$300mn of debt

  • Africa equities outperformed global markets in H1 2022. Nigeria led returns

  • Gambia takes environmental stance to ban export of timber in a bid to save rosewoods from extinction

West Africa junta leaders cave in to civilian rule, avoid sanctions
Janet Ogunkoya
Janet Ogunkoya

Senior Research Analyst

Tellimer Research
7 July 2022
Published byTellimer Research

Junta leaders in the West African region (Mali and Burkina Faso) have finally agreed to transition to civilian rule by 2024. Upon ECOWAS's approval, the severe sanctions on Mali were lifted, but this leaves scars of default on over US$300mn of loans and a reduced IMF growth forecast for the economy. In Ghana, the government caved in to what we felt was inevitable, and may finally seek an IMF bailout. The announcement marks a dramatic U-turn for the government and cheered investors and we saw yields dip.

We also highlight investors' thoughts on the investment case for the West Africa region, after client meetings in London in recent weeks. And we look at timber protectionism measures in Gambia.

ECOWAS leaders lift economic and financial sanctions on Mali after over US$300mn of debt defaults

Members of the Economic Community of West African States (ECOWAS) met on Sunday and voted to lift economic and financial sanctions on Mali. This comes after the junta leader announced it will hold elections in 2024 after facing coups in August 2020 and May 2021. Mali, along with Burkina Faso and Guinea, were suspended from the bloc after the junta leaders failed to hold elections and transition to a civilian government. But only Mali had sanctions imposed upon it. Burkina Faso has come forward with plans for elections in 2024, avoiding sanctions, while Guinea is expected to put forward a new timeline by July after its 3-year proposition was rejected by the bloc.

Since sanctions were placed on Mali, the gold producer has defaulted on over US$300mn of its loans due, as the country's access to the regional central bank and financial markets was restricted. The IMF’s economic growth forecast was also cut to 5.0% from 5.5%, due to the sanctions. With the lifting of sanctions and reopening of borders, Mali could see an improvement in its economy and regain the ability to pay off outstanding debts.

Coup attempts in Africa hit a 30-year high in 2021

What investors think about the West Africa region

Our colleagues held a series of client meetings in Londonin recent weeks, against a challenging global backdrop. In Nigeria, investors were focused whether higher oil prices were good or bad for the country given the decline in production and the costly subsidy regime, and whether next year’s election would deliver a much-needed policy shift. However, most were generally in accordance with our view that default was not likely in the coming years, despite a rather grim fundamental outlook, amid limited prospects for structural reforms and the government’s broken FX regime in the year ahead.

We also highlight the CFA Franc zone countries (Benin, Cote d’Ivoire, Senegal) as having good fundamentals, but less compelling value, which helped them come through the pandemic in good shape, although the recent anti-government protests in Senegal ahead of next month’s parliamentary elections raised some questions from clients. Read the full report here.

Africa equities outperformed in H1 2022 and Nigeria stands out

The global equities market delivered negative returns in H1 22, with the MSCI World index down 20.6%. African markets were not excluded from the sell-off, with MSCI EFM Africa down 10.3%, but they outperformed global and emerging market equities.

Nigeria was an outlier, up 22% in H1. We have previously spotlighted its strong performance ytd and how it has defied the odds, given the country's persistently weak macroeconomic fundamentals. Now, the country's ejection from MSCI FM looms, but we argue the impact on share prices will be modest.

Equities suffered a bloodbath in H1 2022. MSCIEFM Africa outperforms and Nigeria stands out

In our report, we pick out the 20 top-performing stocks in Africa in the first six months of 2022, and highlight some of their shared characteristics.

Ghana bows to the inevitable as the government seeks IMF help

Ghana's government announced on 1 July its intention to commence formal engagement with the IMF, according to a statement released by the country's Ministry of Information. We take this to mean an IMF programme (or bailout), although the carefully constructed statement doesn’t say it explicitly.

The sensible, but surprise, announcement marks a dramatic U-turn for the government, which has previously set much store in not needing the Fund's help (for example, when it ruled out going to the Fund in March). This was despite the inevitability of the decision in the eyes of most investors, as we noted in the takeaways from our recent round of London client meetings.

Ghana eurobond yields (%)

Our colleague, Stuart Culverhouse, assesses how the IMF will respond, and how bond investors should react here.

Lost and found: bronze work heading back to Kingdom of Benin

The Kingdom of Benin in southern Nigeria has excellent bronze work dating back to the thirteenth century. However, there is very little evidence of it in Nigeria itself, as most of the artworks were stolen during the British invasion of the Kingdom of Benin in the 19th century.

The artworks are scattered worldwide, but there is a considerable concentration in England and Germany. Last week, Germany’s foreign minister acknowledged that more than 1,000 pieces of art from the Kingdom of Benin are in German museums, and agreed to return the artefacts to Nigeria.

This is excellent news as it will enrich art and culture in the country, but there are concerns about who will be responsible for them – the Kingdom of Benin or the federal government?

Timber protectionism: the Gambia bans export

We have seen countries take protectionist stances this year. First, it was food protectionism but now it has extended to timber. A few days ago, the Gambian government banned timber exports and permanently revoked all timber export permits. The government says the ban is to prevent the extinction of its rosewood.

There were already concerns around timber supply because of the Russia-Ukraine war. Russia is one of the largest exporters of softwood timber, and sanctions have cut out the supply. The war has also impacted production in Ukraine. These factors mean a tighter timber market, but lower housing demand might drive down demand.


Inflation: Ghana (13 July), Nigeria (15 June)

The IMF expects inflation to rise further in 2022, given the global food and energy supply situation – the Fund expects Ghana's and Nigeria's inflation rates to close the year at 15.8% and 15.6%.

As we have noted, the Russia-Ukraine war has enormous implications for Africa inflation – we expect numbers for both countries to increase.

Our recent West Africa research

  • Our colleagues met over 20 clients in London at the end of June, with a severe EM credit rout setting a dour tone. Most investors were not clear if we had reached bottom, but agreed with the premise that the sell-off had unlocked pockets of value. We summarise the key top-down and country-specific takeaways from our client conversations here.

  • African markets outperformed global markets, albeit delivering negative returns in the first half of the year. Nigeria is an outlier. But there have been strong outperformers at the stock level; we highlight 20 top companies and discuss four in detail.

  • In a surprise announcement, given its previous resistance, Ghana said last Friday that it will seek IMF support. But the decision has a sense of inevitability about it and will come as a relief to bondholders. Programme talks could take time while there are interesting questions on programme design, notably over private sector involvement; retain Buy


The Nigerian equities market has declined 0.5% in the past week, bringing the ytd return to 21%. Market breadth was negative with 36 losers and 31 gainers. Losses in NB, BUAFOODS, INTBREW, WAPCO and FBNH outweighed the gains in stocks such as SEPLAT, UNILEVER and MTNN.

As we have discussed previously, we have a negative outlook on the Nigerian equities market as an anticipated increase in domestic bond yields in the coming months and the absence of foreign investors will put a dampener on local participation.

Market indicators

Tellimer's West Africa Equities Coverage

Nigeria's yield curve (%)

Ghana's yield curve (%)