11 Years After Exit, Nigeria Re-enters JPMorgan’s $328bn Emerging Markets Index

The federal government has announced that Nigeria is returning to a major JPMorgan emerging markets bond benchmark 11 years after its exit, with selected Federal Government of Nigeria bonds included in the newly introduced Government Bond Index Emerging Markets Edge.

The development was announced by the Federal Ministry of Finance on Monday.

JPMorgan, which manages some of the world’s most widely tracked emerging market bond indices, said Nigeria would have a 7.40 per cent weighting in the GBI-EM Edge, placing the country among the highest-weighted of the 26 markets covered by the index.

The new benchmark tracks about $328bn in local-currency government debt across frontier emerging markets.

Commenting on the development, the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, described the inclusion as an endorsement of the Federal Government’s economic reform programme.

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

“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.”

Nigeria’s inclusion represents its first return to a JPMorgan benchmark in more than a decade, following its removal from the GBI-EM Global Diversified Index in 2015 amid foreign exchange liquidity constraints.

The Federal Ministry of Finance said the country’s re-entry reflected the impact of recent economic reforms, particularly the stabilisation of the naira, clearance of the foreign exchange backlog, as well as improvements in economic growth and inflation.

According to the ministry, Nigeria met two major requirements for inclusion in the new index: liquidity and issuance size.

It explained that FGN bonds are actively traded under a Two-Way Quote System, while outstanding volumes across the eligible tenors are significantly above the $250m minimum threshold required for inclusion.

The latest development follows Nigeria’s earlier experience with the JPMorgan benchmark. FGN bonds were first included in the GBI-EM in 2012, a move that attracted substantial foreign investment into the domestic securities market.

The Ministry of Finance said the earlier inclusion also helped reduce Nigeria’s cost of issuance by approximately 200 basis points, while opening the equities and banking sectors to greater foreign capital and supporting the country’s external reserves.

LEADERSHIP reports that Nigeria’s exit from the benchmark in 2015 was linked to foreign exchange liquidity constraints, which limited investors’ ability to enter and exit the Nigerian market.