Nigeria is set to return to a major JPMorgan emerging markets bond benchmark 11 years after leaving the index, following the inclusion of selected Federal Government of Nigeria (FGN) bonds in the newly introduced Government Bond Index Emerging Markets Edge (GBI-EM Edge).
The Federal Ministry of Finance announced the development on Monday, describing it as a significant milestone for Nigeria’s financial markets and economic reform efforts.
JPMorgan, which manages some of the world’s most widely followed emerging market bond indices, said Nigeria would have a 7.40 per cent weighting in the GBI-EM Edge. This places the country among the highest-weighted markets in the index, which covers 26 emerging and frontier markets.
The new benchmark tracks approximately $328 billion worth of local-currency government debt across the markets covered.
Commenting on the development, the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said Nigeria’s inclusion demonstrated growing international confidence in the government’s economic policies.
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 return to the JPMorgan benchmark comes more than a decade after its removal from the GBI-EM Global Diversified Index in 2015, when foreign exchange liquidity challenges made it difficult for international investors to move funds into and out of the Nigerian market.
The Ministry of Finance said the latest inclusion reflects the impact of recent reforms, particularly measures aimed at stabilising the naira, clearing the foreign exchange backlog and improving economic growth and inflation conditions.
According to the ministry, Nigeria satisfied two key conditions for entry into the new index — sufficient market liquidity and adequate bond issuance size.
It explained that eligible FGN bonds are actively traded through a Two-Way Quote System, while the outstanding volumes of bonds within the qualifying tenors are well above the $250 million minimum threshold required for inclusion.
Nigeria had previously joined the JPMorgan GBI-EM in 2012, an inclusion that brought significant foreign investment into the country’s domestic debt market.
The Ministry of Finance said that earlier participation also helped lower Nigeria’s borrowing costs by about 200 basis points. It added that the increased presence of foreign investors supported greater capital flows into the equities and banking sectors while contributing to the strengthening of the country’s external reserves.
Nigeria’s 2015 removal from the JPMorgan benchmark was largely connected to foreign exchange liquidity constraints, which restricted investors’ ability to enter and exit the Nigerian market.
