Power and politics threaten Senegal financing

Senegal nurtures its role as a financial hub for West Africa. A smart move, leveraging its stability. Over the past year of so Islamic financial players are also focusing on Senegal, and vice versa. Indicative of the trend was a forum convened last year SYM International Finance Corporation, in partnership with the Government of Senegal, to assist the Government of Senegal to promote the a Financial Services Center and attract more private investments.

But recent unrest--and actual violence--in Senegal over the legislative power play by President Abdoulaye Wade undermine the county's reputation of stablity, and raise investment concerns. Many have wondered whether the civil disturbances will undermine Senegal's reputation of consistent democratic traditions.

Those concerns are also reflected in the $500 million Eurobond placed this year by Senegal's government. Senegal is rated B+ by Standard & Poors and B1 by Moody’s. When the riots earlier this month were occuring, Senegal’s Eurobond yield was up 4 basis points at 8.215 percent and the price was down 1/4 point at 104.5.

The riots reveal two challenges to Senegal's newfound international finance role. The first is the energy crisis. Power outages are at the root of the civil discontent. But politics plays a companion role. The presidential elections next year are roiling right along with the power woes. Both are concerns that will not go away soon.