JP Morgan adds FGN bonds to emerging markets index

JPMorgan has announced the inclusion of selected Federal Government of Nigeria, FGN, bonds in its newly introduced Government Bond Index–Emerging Markets Edge (GBI-EM Edge).

The Minister of Finance, Taiwo Oyedele, disclosed this in a statement on Monday.

Oyedele said the move reflects improvements in Nigeria’s economic environment following reforms that have helped stabilise the naira, clear foreign exchange backlogs and improve growth and inflation conditions.

Oyedele, described the inclusion as an independent endorsement of the government’s economic reform programme.

“This inclusion is a clear, independent endorsement of the discipline behind President Bola Ahmed Tinubu’s reform agenda,” Oyedele said.

He said the development demonstrated growing confidence among international investors in Nigeria’s economic management and could reduce the cost of financing the government’s development priorities.

Oyedele, however, noted that more work was required before Nigeria could secure full reinstatement in JPMorgan’s flagship index.

“The Federal Government remains committed to sustaining the reform agenda and deepening investor confidence in the domestic market,” the ministry said.

The ministry of finance said index-tracking funds are expected to adjust their portfolios to reflect Nigeria’s new weighting, potentially generating additional foreign demand for FGN bonds over time.

DAILY POST reports that Nigeria’s return to a JPMorgan benchmark comes more than a decade after the country was removed from the GBI-EM Global Diversified index in 2015 because of foreign exchange liquidity constraints.

According to the ministry of finance, Nigeria previously entered the GBI-EM in 2012, a development that attracted substantial foreign investment into the domestic securities market and reduced the government’s borrowing cost by about 200 basis points.

It said Nigeria met the criteria for the new GBI-EM Edge through the liquidity of its FGN bonds, which are actively traded under a Two-Way Quote System, as well as the size of outstanding bond issues.