Nigeria bonds enter J.P. Morgan Frontier Index at 7.4%

Abdullateef Fowewe

Selected Federal Government of Nigeria (FGN) bonds have been included in J.P. Morgan’s newly introduced Government Bond Index–Emerging Markets Edge (GBI-EM Edge), with Nigeria receiving a 7.4 per cent weighting.

The Federal Ministry of Finance in a statement on Monday said the weighting was among the highest allocated to the 26 markets covered by the index and was close to J.P. Morgan’s maximum country limit of eight per cent.

Nigeria qualified for inclusion based on improved liquidity in the domestic bond market and sufficient issuance volumes.

The ministry said FGN bonds are actively traded under a two-way quote system, while outstanding volumes across the eligible tenors exceed the index’s minimum requirement of $250 million.

The development marks Nigeria’s return to a J.P. Morgan bond benchmark more than a decade after the country was removed from the GBI-EM Global Diversified Index in 2015 because of foreign exchange liquidity constraints.

According to the ministry, recent reforms including the stabilisation of the naira, clearance of the foreign exchange backlog, improved economic growth and efforts to control inflation helped strengthen investor confidence in
Nigeria’s domestic debt market.

The GBI-EM Edge tracks approximately $328 billion in local-currency government debt globally.

Nigeria’s 7.4 per cent allocation represents about $17.47 billion in eligible FGN debt across 16 instruments.

The ministry said index-tracking funds are expected to adjust their portfolios to reflect Nigeria’s weighting, potentially attracting significant foreign portfolio inflows into the domestic bond market.

It added that increased demand could support bond prices and gradually reduce domestic yields, thereby lowering the government’s cost of servicing naira-denominated debt.

The inclusion is also expected to improve liquidity across the broader debt market, including Nigerian Treasury Bills, although the index mainly covers medium- and long-term government bonds.

The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, described the development as an endorsement of the Federal Government’s economic reform programme.

“This inclusion is a clear, independent endorsement of the discipline behind President Bola Ahmed Tinubu’s reform agenda,” Oyedele said.

He added that the decision reflected the confidence of international capital markets in Nigeria’s economic management and could reduce the cost of financing the country’s development priorities.

“We remain focused on the work still required to earn full reinstatement in J.P. Morgan’s flagship index,” the minister said.

FGN bonds were first included in the GBI-EM in 2012, a development the ministry said attracted foreign investment, reduced Nigeria’s cost of issuance by approximately 200 basis points, and increased foreign participation in the country’s capital and banking markets.

The Federal Government said it would continue implementing its reform agenda and working to deepen investor confidence in Nigeria’s domestic market.