Plan to Relist FGN Bonds on JPMorgan Index to Boost Demand
Demand for bonds to increase as the Federal Government of Nigeria (FGN) has taken steps to boost the attractiveness of its borrowing notes with a plan to rejoin JPMorgan Government Bond Index for Emerging Markets (GBI-EM), investment experts said in a discussion with MarketForces Africa.
On this note, analysts are expecting the next bond auction to be oversubscribed significantly, noting that the latest treasury bill auction results has set market expectations on pricing.
The Debt Management Office (DMO) is scheduled to conduct its monthly Federal Government Bond auction on April 28, 2025, with two reopening maturities worth N350 billion.
In March, the authority raised N301 billion and cut the spot rate on 5-year bonds by 22 basis points to 19%, but the spot rate on 7-year bonds increased to 19.99% from 19.33%.
“We anticipate increased demand for NGN risk at the upcoming auction, driven primarily by local investors seeking duration as they reinvest recent coupon inflows”, AAG Capital Limited said in a note.
Analysts noted that sentiment is also being buoyed by news of Nigeria’s advanced discussions to rejoin the JP Morgan GBI-EM index, which could further enhance market participation.
Nigeria has officially initiated discussions to rejoin the JPMorgan Government Bond Index for Emerging Markets (GBI-EM) as major foreign exchange reforms begin to take effect.
Patience Oniha, the director-general of the Nigeria Debt Management Office (DMO), revealed this development at the Nigeria Investor Forum held on the sidelines of the International Monetary Fund and World Bank Spring Meetings in Washington, DC.
The decision to rejoin the JPMorgan Index is part of Nigeria’s efforts to restore trust with international investors while demonstrating its commitment to economic reforms and transparency.
Oniha emphasized that Nigeria now meets the eligibility criteria for inclusion, stating, “With the recent reforms in the foreign exchange market, we believe Nigeria meets the criteria to rejoin the index.”
The DMO boss, along with Olayemi Cardoso, the Central Bank of Nigeria Governor, highlighted the naira’s stability and rising investor confidence. This optimism is supported by Fitch’s recent upgrade of Nigeria’s long-term foreign-currency rating to ‘B’ from ‘B-‘, signaling renewed investor confidence.
Nigeria was initially included in the JPMorgan Index in 2012. However, it was placed on a negative watchlist before being officially removed in 2015 due to concerns over transparency and liquidity issues.
The JPMorgan GBI-EM is a key benchmark used by investors to track the performance of local currency-denominated government bonds in emerging markets. It includes only countries that are accessible to most international investors, and inclusion in the GBI-EM is crucial for emerging markets, as it boosts foreign investment and enhances access to capital markets. Naira Appreciates as CBN Sells Additional Dollars in FX Market
