Thursday | 28 Sep 2023

Gabon coup spooks investors following debt-for-nature arrangement

We recently reported that the central African state of Gabon had successfully negotiated a $436 million “debt-for-nature” swap, in order to help fund marine conservation.

The arrangement involved switching Gabon’s debt-pile to a new $500 million “blue bond” with a lower interest rate and longer maturity – enabling the country to pay its dues on more favourable terms, whilst generating $163 million for marine conservation projects over an extended period.

Now comes a big BUT.

Earlier this week, Gabon’s President Ali Bongo was deposed in an army-led coup and placed under house arrest. The overthrowal of the long-standing President, whose family have ruled the country since the 1960s, followed last weekend’s national elections. Mr Bongo, who came to power upon his father’s death in 2009, was declared the winner, but the opposition have claimed the result was fraudulent.

It’s been announced that Gen Brice Oligui Nguema, who was head of the presidential guard, will replace Bongo as interim leader.

Wider fears over contagion and debt security

Amid fears of contagion, the turmoil has triggered a significant sell-off of Gabon’s international bonds, with investors being spooked about the country’s conservation-linked debts.

Analysts have warned that the sell-off could spill over to the debt securities of other African countries.

Mark Bohlund, senior credit research analyst at REDD Intelligence, said that whilst Central Africa did not have the same recent history of military coups as West Africa, neighbouring countries such as Cameroon and the Republic of Congo could be vulnerable to similar takeovers.

Upon news of Gabon’s power grab, the nation’s dollar and eurobonds dropped substantially. It’s feared that investors connected to the much-heralded debt-for-nature swap, will be concerned by Gabon’s bond losses and the uncertain political situation in the country.

“The debt-for-nature swap has been completed and will thus not be affected directly,” Bohlund said. “But the price of the bond issued by the Gabon blue bond master trust is likely to fall to a lesser extent than the unguaranteed eurobonds.”

Prior agreements placed in jeopardy

Meanwhile, research organisation Bloomberg Economics, said the jettisoning of Gabon’s eurobonds could put in jeopardy any of the commitments made by the ousted administration. “Agreements made by the Bongo administration are at risk of being put up for review,” said Bloomberg Economics.

The coup has received widespread international condemnation. The United States, Russia, China and the UN have all expressed concern, with the French government saying the election results should be respected.

The EU’s Head of Foreign Policy, Josep Borrell, warned that a military takeover would increase instability in Africa. “This is a big issue for Europe,” he said.

Will “Debt-for-Nature” deals become the norm? – EMEA (

Gabon Coup Triggers Bond Selloff Sparking Contagion Fears (

Gabon coup: Army seizes power from Ali Bongo and puts him in house arrest – BBC News

Gabon coup: Military officers place president under house arrest | CNN

Gabon coup updates: General Nguema named interim leader | Military News | Al Jazeera