The African Development Bank (AfDB) has successfully issued its first bond denominated in Moroccan dirhams, raising MAD 1 billion ($100 million). This transaction was carried out through a private placement with qualified investors and has a seven-year maturity with a floating interest rate indexed to the Moroccan Overnight Index Average (MONIA). The bank views this issuance as part of its strategy to diversify its financing offerings in Morocco and serve a wider range of clients.
The move is particularly significant for Moroccan businesses and institutions whose revenues are primarily generated in dirhams. By borrowing in the same currency, these entities can reduce their exposure to exchange-rate risk and fluctuations. However, the floating rate leaves them exposed to shifts in borrowing costs. The issuance is tied to MONIA, a benchmark introduced by Bank Al-Maghrib (BAM) on January 2, 2020, as part of efforts to modernize the domestic money market and support interest-rate hedging.
This is not Morocco's first internationally issued dirham bond. On February 4, 2005, the International Finance Corporation (IFC), part of the World Bank Group, issued MAD 1 billion in seven-year bonds. The IFC bond carried a fixed rate of 4.54%, was listed on the Casablanca Stock Exchange, and drew more than 20 institutional investors. It helped establish Morocco's Atlas bond market for foreign issuers.
The AfDB bond differs from the IFC issue in structure. While the IFC bond had a fixed rate and was publicly listed, the AfDB bond carries a floating MONIA-linked rate and was placed privately. Other lenders, such as the European Bank for Reconstruction and Development (EBRD), have found it challenging to enter the dirham bond market due to regulatory framework issues, disclosure requirements, and competition with Moroccan government debt.
The bond issuance follows a series of AfDB commitments to Morocco this year. On October 22, the bank announced a $487 million package for economic reforms and climate resilience. This came after a €270 million agreement on September 30 for airport infrastructure in Marrakech, Agadir, Fez, and Tangier, and a combined €405 million signed on September 17 for high-speed rail and vocational training.
The AfDB has chosen Morocco as a pilot for its dirham bond issuance due to the long-standing partnership between the kingdom and the bank, the size of the institution's portfolio in the country, client demand for dirham financing, and the maturity of the Moroccan financial ecosystem. The bank intends to help deepen the national financial market by working with the government and local participants to develop hedging instruments and strengthen liquidity in the derivatives market.
The African Development Bank already lends in several African currencies and expects the lessons from Morocco to guide further local-currency financing across the continent. Attijari Finances Corp. acted as financial adviser, with Attijariwafa Bank and CDG Capital as lead managers. The AfDB, established in 1964, holds an AAA rating and counts 81 member countries, 54 of them African. Since 1978, the bank has mobilized nearly €15 billion for more than 150 projects in Morocco.
Key points
- The African Development Bank has raised MAD 1 billion ($100 million) in its first Moroccan dirham bond issuance.
- The bond has a seven-year maturity with a floating interest rate indexed to the Moroccan Overnight Index Average (MONIA).
- The issuance aims to diversify the bank's financing offerings in Morocco and serve a wider range of clients.
