J.P. Morgan has relisted the Federal Government of Nigeria (FGN) Bonds in its newly introduced Government Bond Index–Emerging Markets Edge (GBI-EM Edge), marking Nigeria’s return to a J.P. Morgan bond benchmark after more than a decade.
The index, which tracks local-currency government debt across frontier emerging markets, has a total coverage of about $328 billion in government debt across 26 markets.
Nigeria secured a 7.40 per cent weighting in the index, one of the highest allocations among the markets covered and close to J.P. Morgan’s maximum country weighting of eight per cent.
The inclusion is seen as a boost to investor confidence in Nigeria’s domestic debt market, following recent economic reforms by the Federal Government, including measures to stabilise the naira, clear foreign exchange backlogs and improve economic growth and inflation outcomes.
Nigeria met the index’s eligibility requirements based on the liquidity and size of its government bond market. FGN Bonds are actively traded under the Two-Way Quote System, while outstanding volumes across the eligible tenors exceed the minimum $250 million requirement.
The development also represents Nigeria’s return to a J.P. Morgan benchmark since its exit from the GBI-EM Global Diversified index in 2015, following foreign exchange liquidity challenges.
FGN Bonds were initially included in the GBI-EM in 2012, a move that attracted significant foreign investment into Nigeria’s domestic securities market and helped reduce the government’s cost of issuance by about 200 basis points.
According to the announcement, Nigeria’s 7.40 per cent index allocation represents approximately $17.47 billion of eligible FGN debt across 16 instruments.
The Federal Government expects index-tracking funds to adjust their portfolios to reflect Nigeria’s weighting, potentially generating additional foreign portfolio inflows into the domestic bond market.
The increased participation of foreign institutional investors is also expected to support bond prices and contribute to a gradual reduction in yields, which could lower the government’s cost of servicing naira-denominated debt.
Improved liquidity in the FGN bond market could equally have positive effects across the broader domestic debt market, including Nigerian Treasury Bills, over time.
Reacting to the development, the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, described the inclusion as an independent endorsement of the Federal Government’s economic reform programme under President Bola Ahmed Tinubu.
Oyedele said the development demonstrated growing confidence in Nigeria’s economic management and would help reduce the cost of financing the country’s development priorities.
“This inclusion is a clear, independent endorsement of the discipline behind President Bola Ahmed Tinubu’s reform agenda,” Oyedele said.
He added that the government remained committed to addressing outstanding challenges required to secure Nigeria’s full reinstatement in J.P. Morgan’s flagship index.
The Federal Government said it would continue to sustain its economic reform agenda and deepen investor confidence in Nigeria’s domestic financial market.
