In a rare joint reaction to the decision by US investment bank, JP Morgan to phase out Federal Government of Nigeria (FGN) Bonds from its Government Bond Index for Emerging Markets (GBI-EM) by the end of October, the Federal Ministry of Finance, Central Bank of Nigeria (CBN) and Debt Management Office (DMO) yesterday said Nigeria and the interest of Nigerians were paramount, and will continue to take economic decisions that will impact positively on the lives of all citizens.


In a statement signed by CBN’s Director Corporate Communications, Mr. Ibrahim Mu’azu, on behalf of the three institutions responsible for the management of the Nigerian economy, they also said “the market for FGN Bonds remains strong and active due primarily to the strength and diversity of the domestic investor base”.


Reuters yesterday reported that JP Morgan will by October ending phase out Nigeria from its bond index, warning that currency controls introduced by the CBN in recent months were making bond market transactions too complex to meet its rules.


When the naira was weakened by the global plunge in oil prices, Nigeria first used its currency reserves to try to stabilise it, then resorted to market controls as pressure persisted.


JP Morgan’s decision to phase Nigeria out of its index which many investors track, marked the conclusion of a process initiated in January, Reuters reported.


Some bonds will be removed by the end of September and the rest by the end of October, JP Morgan said.
Earlier, it had said that to stay on the index, Nigeria would have to restore liquidity to its currency market in a way that allows foreign investors tracking the index to conduct transactions with minimal hurdles.


“Foreign investors who track the GBI-EM series continue to face challenges and uncertainty while transacting in the naira due to the lack of a fully functional two-way FX market and limited transparency. As a result, Nigeria will be removed from each of the six GBI-EM indices starting Sept 30,” the bank said in a note.


The central bank had to devalue the naira and pegged it at a fixed rate against the dollar, turning trading into a one-way quote currency market whose lack of transparency angered investors and businesses.


The index provider said Nigeria would not be eligible for re-inclusion in the index for a minimum of 12 months. To get back in, it has to establish a consistent record of satisfying the index inclusion criteria, such as a liquid currency market.


Removal from the index would force funds tracking it to sell Nigerian bonds they hold, potentially resulting in significant capital outflows.
That in turn would raise borrowing costs for Africa's largest economy, already suffering from a sharp drop in revenue following the plunge in oil prices.


But in its response to the decision by JP Morgan, the finance ministry, CBN and DMO said: “While we respect the right of JP Morgan to make this decision, we would like to strongly disagree with the premise and conclusions upon which the decision rests.”


They recalled that Nigeria was included on the index in October 2012, based on the existence of an active domestic market for FGN Bonds supported by a two-way quote system, dedicated market makers and diverse investors.


“However, in January 2015, JP Morgan placed Nigeria on an index watch as a result of their concerns in the operations of our foreign exchange market, namely: 1) lack of liquidity for transactions; 2) lack of transparency in the determination of the exchange rate; and 3) lack of a fully functional two-way forex market.


“In our continuous bid to strengthen the Nigerian financial market and enhance our status as a preferred destination for investors, we took measures to improve the market.


“Despite the fact that oil prices have fallen by nearly 60 per cent in one year, which should expectedly reduce the amount of liquidity in the market, the CBN ensured that all genuine and effective demand was met, especially those from foreign investors.


“On transparency, the CBN mandated that all forex transactions were posted online in the Reuters trading platform so that all stakeholders can easily verify all transactions in the market.
“In addition, the official forex window at the CBN was closed to ensure a level-playing field in the pricing of foreign exchange,” the statement said.


The three Nigerian institutions further drew the attention of JP to the existence of a functional two-way forex market in Nigeria, adding however that given the high propensity for speculation, round tripping, and rent-seeking in the market, “it became imperative that participants are not allowed to simply trade currencies but are only in the market to fulfill genuine customer demand to pay for eligible imports and other transactions”.


“In the light of this, we introduced an order-based, two-way forex market, which has resulted in the stability of the exchange rate in the interbank market over the past seven months and largely eliminated speculators from the market.


“Despite these positive outcomes, JP Morgan would prefer that we remove this rule, even though it is obvious that doing so would lead to an indeterminate depreciation of the naira.


“With dwindling oil prices, we believe that an order-based two-way market best serves Nigeria’s interest at the moment,” they maintained.
The ministry, CBN and DMO added that they shall continue to ensure that there is liquidity and transparency in the market, they assured JP Morgan and other investors that the market for FGN Bonds remained strong and active due primarily to the strength and diversity of the domestic investor base.


“For the avoidance of doubt, the federal government sees Nigeria and the interest of Nigerians as paramount. It will therefore only continue to take economic decisions that will impact positively in the lives of all Nigerians,” they stated.


The JP Morgan index has around $210 billion in assets under management benchmarked to it. That benchmarking supports investor demand for the bonds on the index.


Nigeria became the second African country after South Africa to be listed on the JP Morgan emerging government bond index in October 2012 after the central bank removed the restriction for foreign investors to hold government bonds for a minimum of one year before they could exit.


The index added Nigeria’s 2014, 2019, 2022 and 2024 bonds, giving Africa’s biggest economy a weight of 1.8 per cent on the index.
Analysts said JP Morgan's decision to eject Nigeria came earlier than expected. Most international investors had already exited Nigeria’s debt last year, it said.


Traders told Reuters yesterday the central bank started rationing dollars to foreign investors last week.
Nigeria’s foreign reserves stood at $31.01 billion as at September 7, down 21.6 per cent from a year ago, when it was $39.6 billion, the central bank said.


“Nigeria’s inclusion in the GBI-EM index was generally seen as a big step forward in its integration with global financial markets, opening the market to new investment and raising its profile worldwide. That will now be reversed,” an economist at Exotix, Alan Cameron said.
With Nigeria’s removal, countries like Malaysia, Indonesia and Thailand have increased their weight by more 25 basis points as of August 31, JP Morgan said in the note.


Foreign holdings of Nigerian government bonds stood at around $2.75 billion, the head of Africa strategy at Standard Chartered Bank Samir Gadio said. They had been around $8 billion last September.


He said the market was underweight Nigeria relative to the index before the announcement.
“This will initially trigger excess volatility in the market as exiting offshore accounts and onshore investors may push yields higher,” Gadio said. “A potential exclusion from the GBI-EM indices would make it more difficult to attract foreign portfolio flows in the future as Nigeria will need to rebuild its market credentials.”

http://www.thisdaylive.com/articles/fg-nigerias-interest-paramount-as-jp-morgan-delists-fgn-bonds/219737/

Brace yourselves welfare seeking Nigerians, tough times are ahead.
The economy is heading for a recession by the last quarter of the year and if Iran is allowed to release more oil into the already over saturated oil market, oil price might even fall below $40.....
In the midst of all this, the country is yet to get an economic Marshall plan and even an economic team.
Okonjo Iweala's tireless efforts placed the Nigerian economy on a pedestal, kept us at constant 7% growth, single digit inflation, got us into the bond index etc while Bubu's body language or is it body odour has got us here.

The recent turn of events has created mixed reaction among Nigerians.
with so many question on every ones lips
what does the future hold for us as a nation?

click LIKE if you foresee GLORY DAYS AHEAD

click SHARE if you foresee DOOM AHEAD but don't want it to happen

#Nigerianspeaks

Buhari needs an economic management team and he needs it ASAP....

SenseiX:
Brace yourselves welfare seeking Nigerians, tough times are ahead.
The economy is heading for a recession by the last quarter of the year and if Iran is allowed to release more oil into the already over saturated oil market, oil price might even fall below $40.....
In the midst of all this, the country is yet to get an economic Marshall plan and even an economic team.
Okonjo Iweala's tireless efforts placed the Nigerian economy on a pedestal, kept us at constant 7% growth, single digit inflation, got us into the bond index etc while Bubu's body language or is it body odour has got us here.

Someone should please speak Hausa to Baba Daura, I don't think he understands all this, he only understands fighting quarruption.

We warned them, back to 1984
Lalasticlala

JP Morgan should go to hell with their bond listing. We can't continue to hurt our local currency because we want to meet their listing conditions. The crash of crude oil price is seriously affecting our economy and they want us to do nothing to protect our naira.

Beside, Nigeria's financial sector is big enough to maintain the trade of FG's bond.

In four years time, we will gauge the extent of economic damage this govt will have inflicted on this country.

seunmsg:
JP Morgan should go to hell with their bond listing. We can't continue to hurt our local currency because we want to meet their listing conditions. The crash of crude oil price is seriously affecting our economy and they want us to do nothing to protect our naira.

Beside, Nigeria's financial sector is big enough to maintain the trade of FG's bond.

I am sure the Nigerian economy is better than Thailand, malaysia and singapore, who are soaring in the J.P morgan listings and would do anything to remain there.
Zombie.

We shall weather the storm.

We will emerge stronger.

China did not participate in the derivatives market for years. They were driven by need to curb corruption and do things that only benefits their country.

That is the right way to go. It gives us the opportunity to strengthen our bond with more local content than foreign investors that can easily call back their funds at any point in time. Thereby immunising our economy from capital flight and sabotage.

We will only do things that will benefit our people and country. They will come back to beg us.

CSTR2:
I am sure the Nigerian economy is better than Thailand, malaysia and singapore, who are soaring in the J.P morgan listings and would do anything to remain there.
Zombie.

And the economy of Thailand, Malaysia and Singapore depends on crude oil right?

superstar1:
We shall weather the storm.

We will emerge stronger.

China did not participate in the derivative market for years. They were driven by need to curb corruption and do things that only benefits their country.

That is the right way to go.

you sound more hopeful than even Buhari
what is the secret

Ngozi where u @?,forget d issue of begin Pdp or apc member bt ngozi iwela,she is a genius,d world d feel her die,jus was unlucky begin in this last administration.plenty people were no even pass common econs or commerces for waec go the get mouth the insult her,make thunder scatter u.

seunmsg:


And the economy of Thailand, Malaysia and Singapore depends on crude oil right?

The Nigerian economy was dependent on crude when Nigeria was celebrated by J.P morgan for her economic exploits.
Nigerian economy was dependent on crude when we were enjoying a 7% growth rate and an uncommon FDI influx that has now dropped by 54% under buhari.
Your president is an economic assassin.
The precedence was set in 1984.

Trailblazer1:


Ngozi Okonjo Iweala deserves to be celebrated for keeping us afloat all these years. she is indeed a rare gem

regardless of her haters from some bigoted sect. she is our hero

Worship her as much as you like, but the facts remains that her poor handling of the nation's economy got us to where we are today. If she had intelligently prepared the nation for a period of lower crude oil prices like we are experiencing today, maybe we won't be in this mess. And please, read the story very well. Nigeria was placed on the index watch in January this year when Ngozi Okonjo Iweala was the Minister of finance. The process of Nigeria's delisting which started under her in January is just about being concluded now. What the PMB government is doing is to clear the mess she and your GEJ created.

kITATITA:

Did you read in the article that Nigeria was placed on index watch since January 2015; and Okonjo Iweala was still the Finance Minister then. Mrs. Iweala's Federal Government and the profligate governors couldn't diversify the economy when oil price remained consistently above 100 dollars for years. They preferred feeding bottle economics

Nigeria was placed on watch in January primarily because of concerns about the elections. It was anticipated that after the elections whichever side emerged would take certain steps to address the slide in the value of the naira and dwindling oil revenue.
GEJ had sound economic advisers and the govt planned to remove the subsidy, raise VAT to 10% and devalue the naira to stem the slide which are all reasonable steps that would have calmed the markets and reassured investors.
Sadly Buhari who had no economic plan came in, spends 5 months without an economic team leaving both monetary and fiscal policy to the CBN governor, decides to maintain the inefficient and bloated subsidy and then engages in a futile attempt to protect the naira against the inevitable slide.
He focuses on phantom corruption probes that have not resulted in anyone being charged or any funds recovered, only gleeful tales on the pages of the newspapers.
And you wonder why investors are fleeing.

CSTR2:
The Nigerian economy was dependent on crude when Nigeria was celebrated by J.P morgan for her economic exploits.
Nigerian economy was dependent on crude when we were enjoying a 7% growth rate and an uncommon FDI influx that has now dropped by 54% under buhari.
Your president is an economic assassin.
The precedence was set in 1984.

You are just being mischievous. We were listed in January 2012 when crude oil price was averaging $120 in the international market. Today, it's averaging $40. So, you can't compare the economic outlook of Nigeria in a period of economic boom to that of a period of economic recession.

And stop the lies, Nigeria's economy didn't enjoy 7% growth rate last year. Even the projection for this year going by GEJ's budget is around 4% or so. This should show you times are different.

Lalasticlala front page

CSTR2:
I am sure the Nigerian economy is better than Thailand, malaysia and singapore, who are soaring in the J.P morgan listings and would do anything to remain there.
Zombie.

You mean this type of zombie?

Trailblazer1:


you sound more hopeful than even Buhari
what is the secret

It is a cycle which seems to be in the downward swinging now. Definitely, the upward swing will surely come.

Mark it.

I hereby invoke APC economic think-tank on Nairaland to explain the economic implications of this action

you already know who it is

Ngeneukwenu, pls take the floor and educate us

superstar1:


It is a cycle which seems to be in the downward swinging now. Definitely, the upward swing will surely come.

Mark it.

and the hope continues


when will you face reality

SenseiX:

Nigeria was placed on watch in January primarily because of concerns about the elections. It was anticipated that after the elections whichever side emerged would take certain steps to address the slide in the value of the naira and dwindling oil revenue.
GEJ had sound economic advisers and the govt planned to remove the subsidy, raise VAT to 10% and devalue the naira to stem the slide which are all reasonable steps that would have calmed the markets and reassured investors.
Sadly Buhari who had no economic plan came in, spends 5 months without an economic team leaving both monetary and fiscal policy to the CBN governor, decides to maintain the inefficient and bloated subsidy and then engages in a futile attempt to protect the naira against the inevitable slide.

Nigeria was not placed on watch because of elections. The naira was already taking a beating and the economy was already stressed. This government will still remove subsidy, increase VAT and take other harsh economic measures. However there has to be paliative measures; like licensing for modular refineries, raising installed capacity utilization through energy optimization, institutional framework and minimizing leakages.

this is where Bubu's body language or is it body odour has got us.



it's not his fault, he's just naturally dull. That odour must be that of cow dung

Hope the #SaiBaba are still celebrating the gworo chewing DauraDullard and trying to create virtual achievements?

Let the JP Morgan go to Hell. Enough to their Slavery-like policies.

The should know that WE now have a "New Sherif in Town"

Thought the U.S is a friend of buhari

Ok

oh

Blah blah...space booking