Nigeria has secured a place in JP Morgan’s newly introduced Government Bond Index–Emerging Markets Edge (GBI-EM Edge), in a development the Federal Government says reflects growing investor confidence in the country’s economic reforms.
The Federal Ministry of Finance said JP Morgan, manager of the world’s most widely tracked emerging market bond indices, had included selected Federal Government of Nigeria (FGN) Bonds in the new benchmark.
The GBI-EM Edge tracks local-currency government debt across frontier emerging markets.
Nigeria earned inclusion based on the liquidity of its domestic bond market and the size of its government bond issuances.
The ministry said FGN Bonds are actively traded under a Two-Way Quote System, while outstanding volumes across each tenor exceed the $250 million minimum required for inclusion.
Nigeria has been assigned a 7.40 per cent weighting, one of the highest among the 26 markets covered by the index and close to J.P. Morgan’s eight per cent maximum country weighting.
Nigeria returns to JP Morgan benchmark
The development marks Nigeria’s return to a JP Morgan benchmark more than a decade after it exited the GBI-EM Global Diversified index in 2015.
The government attributed the return to reforms addressing foreign exchange liquidity constraints, including measures to stabilise the naira and clear the FX backlog.
FGN Bonds were first included in the GBI-EM in 2012.
According to the Finance Ministry, the earlier inclusion helped attract foreign investment into Nigeria’s domestic securities market, reduce issuance costs by about 200 basis points, open the equities and banking sectors to foreign capital and support the growth of external reserves.
$17.47bn in eligible Nigerian debt
The ministry said the GBI-EM Edge tracks about $328 billion in local-currency government debt globally.
Nigeria’s 7.40 per cent allocation represents approximately $17.47 billion of eligible FGN debt across 16 instruments, it added.
Index-tracking funds are expected to adjust their portfolios to reflect Nigeria’s weighting, potentially bringing additional foreign portfolio inflows into the domestic bond market over time.
The government said stronger demand from foreign institutional investors could support bond prices and gradually reduce domestic yields, helping to moderate the cost of servicing naira-denominated debt.
Improved liquidity in FGN Bonds could also have positive effects across other parts of the domestic debt market, including Treasury Bills.
Oyedele hails reform impact
Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, described the inclusion as an independent assessment of progress under the Federal Government’s reform programme.
“This inclusion is a clear, independent endorsement of the discipline behind President Bola Tinubu’s reform agenda,” Oyedele was quoted as saying.
He said the development reflected growing confidence in Nigeria’s economic management and could lower the cost of financing development priorities.
“We remain focused on the work still required to earn full reinstatement in JP Morgan’s flagship index,” he added.
