Nigeria is in advanced talks with JP Morgan to re-enter the Government Bond Index and regain the trust of investors, according to Patience Oniha, Director-General of the Debt Management Office.
At a Nigerian Investors’ Forum held on the fringes of the World Bank and International Monetary Fund Spring Meetings in Washington, D.C., on Wednesday, Oniha made this revelation.
The head of the DMO clarified that the Central Bank of Nigeria’s extensive changes have resulted in Nigeria’s recent positive credit evaluation by rating agencies.
With stable outlooks, Fitch Ratings has raised the Long-Term Issuer Default Ratings of seven Nigerian banks and two bank holding companies from “B-” to “B.”
Guaranty Trust Bank Limited, Guaranty Trust Holding Company Plc, Access Bank Plc, Zenith Bank Plc, United Bank for Africa Plc, First HoldCo Plc, First Bank of Nigeria Ltd, Fidelity Bank Plc, and Bank of Industry Limited are the issuers that are impacted.
According to the rating agency, Fitch believes that Nigeria’s sovereign credit profile no longer significantly limits the issuers’ standalone creditworthiness, which is why the banks’ Long-Term IDR upgrades came after the recent sovereign upgrade.
Additionally, on April 11, Fitch upgraded Nigeria’s Long-Term IDRs from “B-” to “B.” This move demonstrated a greater level of confidence in the government’s broad commitment to policy reforms since it switched to orthodox economic policies in June 2023, including tightening monetary policy, liberalizing the exchange rate, ending deficit monetization, and eliminating fuel subsidies.
According to Fitch, “these have enhanced resilience in the context of persistent domestic challenges and heightened external risks, and reduced economic distortions and near-term risks to macroeconomic stability.” They have also increased policy coherence and credibility.
Nigeria was removed from the JP Morgan index in 2015 ostensibly due to its deviation from orthodox monetary policies and influence of capital control in its management of foreign exchange.
Principally due to reduction in oil revenues at the time, Nigeria introduced currency restrictions to defend the naira after it failed to halt a dangerous slide with burning of dollar reserves. The bank had earlier warned Nigeria to restore liquidity to its currency market in a way that allowed 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,” the bank said in a 2015 note.
Nigeria was listed in JP Morgan’s emerging government bond index in October 2012, after the central bank removed a requirement that foreign investors hold government bonds for a minimum of one year before exiting.
The JP Morgan Government Bond Index reflects investor confidence and opens doors to billions of investment flows, making Nigeria’s proposed re-entry a positive signal to the market and investors.
Oniha explained that talks with JP Morgan were ongoing and had gained momentum in recent times due to the stability created by the FX market reforms.
“With all the reforms that have taken place, particularly around FX, we have started engaging JP Morgan again to get back into the index. We think we are eligible now,” the DMO DG said.
About The Author
