JPMorgan says may eject Nigeria from key bond index by year-end

08 Jun, 2015

J. P Morgan will eject Nigeria from its Government Bond Index (GBI-EM) by the year-end unless it restores liquidity to currency markets in a way that allows foreign investors tracking the benchmark to transact with minimal hurdles.
The bank said late on Friday it had extended the deadline to eject Africa's biggest economy by another six months to take into account the arrival of President Muhammadu Buhari.
Nigeria held closely-fought presidential elections in March, in which opposition leader Buhari defeated incumbent president Goodluck Jonathan, in the country's first transition of power through the ballot box.
J. P Morgan, which runs the most commonly used emerging debt indexes, placed Nigeria on a negative index watch in January and then said it would assess its place on the index over a three to five months period.
"Nigeria's status in the GBI-EM series will be finalised in the coming months but no later than year-end," J. P Morgan said.
Removal from the index would force funds tracking it to sell Nigerian bonds from their portfolios, potentially resulting in significant capital outflows. This in turn would raise borrowing costs for Africa's largest economy, already suffering from a sharp drop revenue following a plunged in oil prices.
Nigeria's forex and bond markets have come under pressure after the price of oil, Nigeria's main export, plunged. In response, the central bank fixed the exchange rate in February after devaluing the naira last year and tightened trading rules to curb speculation. The naira has lost 8.5 percent this year.

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