Nigeria targets JPMorgan bond index return after FX transparency issues
Nigeria is in formal discussions with JPMorgan to re-enter the Government Bond Index for Emerging Markets.
Recent FX reforms have made Nigeria eligible to re-enter JPMorgan's bond index.
Nigeria's poor performance in the index was primarily due to concerns over foreign exchange transparency and market liquidity.
Nigeria's Debt Management Office chief, Patience Oniha noted that recent FX reforms have made the country eligible to re-enter JPMorgan's bond index, and active engagement with the firm has resumed.
Oniha made the announcement during the Nigerian Investor Forum at the International Monetary Fund and World Bank Spring Meetings in Washington DC
She said, "With the reforms implemented, the foreign exchange market has improved, and we're eligible again."
The country's push for re-entry signals efforts to address past challenges and improve the accessibility and stability of its financial markets, with the aim of attracting renewed interest from global investors.
Joining JPMorgan's Government Bond Index for Emerging Markets offers African nations several benefits, including increased foreign investment, improved liquidity, enhanced credibility, lower borrowing costs, and strengthened economic reforms.
These factors can significantly boost financial stability and long-term growth..
Nigeria's poor outing in the JPMorgan index
Nigeria's poor performance in the JPMorgan Government Bond Index for Emerging Markets has been primarily attributed to concerns over foreign exchange (FX) transparency and market liquidity.
The country was removed from the index nearly a decade ago due to challenges in its FX market, which was marked by volatility and a lack of transparency. The index only includes countries that are accessible to foreign investors without significant obstacles.
Nigeria was initially added to the index in 2012, following South Africa, but was delisted in 2015 due to allegations of insufficient liquidity and opaque FX pricing.
JPMorgan had warned that " currency controls were making transactions too complicated," and placed Nigeria on negative index watch before its official removal on September 8, 2015.
The bank had also cautioned that, to remain in the index, Nigeria needed to restore liquidity to its currency market in a way that allowed foreign investors to transact with minimal hurdles.
These issues undermined investor confidence, making it difficult for international investors to assess the risk and value of Nigeria's bonds.
Since then, Nigeria has introduced significant reforms, including the unification of multiple exchange rate windows by the Central Bank of Nigeria (CBN) and a reduction in direct interventions in the FX market.
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