JP Morgan Lists FGN Bonds In New Emerging Markets Index

The Federal Government has announced the listing of selected Federal Government of Nigeria (FGN) Bonds in J.P. Morgan’s newly introduced Government Bond Index–Emerging Markets Edge (GBI-EM Edge), describing the development as a significant recognition of the country’s economic reforms and growing investor confidence.

According to the Federal Ministry of Finance, J.P. Morgan, manager of the world’s most widely tracked emerging market bond indices, disclosed the inclusion of selected FGN bonds in the new benchmark, which tracks local-currency government debt across frontier emerging markets.

The ministry said that Nigeria qualified for inclusion based on the liquidity of its domestic bond market and the size of its government bond issuances.

“Nigeria qualified on two key measures: liquidity, with FGN Bonds actively traded under a Two-Way Quote System, and issuance size, with outstanding volumes per tenor well above the USD 250 million minimum required for the GBI-EM Edge,” it said in a statement on Monday. “Nigeria’s weighting in the index is 7.40 per cent, among the highest of the 26 markets covered and close to J.P. Morgan’s eight per cent maximum country weighting.”

The Federal Government said the development reflects the impact of reforms aimed at stabilising the naira, clearing the foreign exchange backlog and improving broader economic indicators, including GDP growth and inflation.

The inclusion, it said, also marks Nigeria’s return to a J.P. Morgan benchmark for the first time in more than a decade, following its exit from the GBI-EM Global Diversified index in 2015 amid foreign exchange liquidity constraints which the current reform agenda has directly addressed.

FGN Bonds were first included in the GBI-EM in 2012.

According to the ministry, that inclusion helped attract significant foreign investment into Nigeria’s domestic securities market, reduced issuance costs by approximately 200 basis points, opened the equities and banking sectors to foreign capital and supported the growth of external reserves.

“The GBI-EM Edge tracks approximately $328 billion in local-currency government debt globally. Nigeria’s 7.40 per cent allocation represents roughly $17.47 billion of eligible FGN debt across 16 instruments,” it stated. “Index-tracking funds are expected to adjust their portfolios to reflect Nigeria’s weighting, which should channel additional foreign portfolio inflows into the domestic bond market over time.”

The ministry said index-tracking funds are expected to adjust their portfolios to reflect Nigeria’s weighting, potentially directing additional foreign portfolio inflows into the domestic bond market over time.

It added that increased demand from foreign institutional investors could support bond prices and gradually ease domestic yields, helping to moderate the cost of servicing the government’s naira-denominated debt.

The government said that broader domestic debt market could also benefit, as improved liquidity in FGN Bonds is expected to have positive knock-on effects across other segments, including Treasury Bills, over time.

Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, while reacting to the development, said it represented an independent assessment of the progress made through 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. “It reflects the confidence international capital markets now place in Nigeria’s economic management, and it lowers the cost of financing our development priorities. We remain focused on the work still required to earn full reinstatement in J.P. Morgan’s flagship index.”