The Debt Management Office (DMO) has called the bluff of J. P Morgan for delisting Nigeria from the Bond Index for Emerging Markets, insisting that the nation’s bonds were not affected by the removal.
Director-General, DMO, Abraham Nwankwo, had at a news conference in Abuja on Wednesday, said that the Federal Government’s bonds remain strong and robust.
J. P Morgan Chase and Co. had delisted Nigeria from its Government Bond Index for Emerging Markets (GBI-EM) for alleged lack of liquidity for transactions and transparency in the determination of exchange rate.
The American bank, which has around $210 billion in assets under management benchmarked to it, added Nigeria to its index in 2012.
On January 16, J. P Morgan, which is the largest financial services holding company in the United States and the world’s fifth largest bank with total assets of $2.6 trillion, placed Nigeria on a negative index watch and finally delisted Nigeria on September 8.
But Nwankwo said Nigeria’s removal from the index “does not amount to a downgrade of Nigeria or FGN Bonds since J. P Morgan is not a credit rating agency.”
“It does not have any impact on the quality of the FGN Bonds. They remain risk-free securities that are backed by the full faith and credit of the Federal Government and are charged upon the general assets of Nigeria.
“It does not imply that the Bonds are no longer liquid.” Nwankwo also said that FGN Bonds were supported by an active secondary market, which allowed investors to buy or sell them on any business day.
He said this could be done through any of the 13 primary dealer market makers licensed by the DMO or on the Nigerian Stock Exchange (NSE) where the bonds were listed and for which purpose there was a government stockbroker.
The DMO boss said that although the Index was a strong tool for attracting foreign investors to invest in the Nigerian Bonds market, it did not mean they would be prevented from doing so.
“It does not imply that foreign investors cannot or will not be allowed to invest in FGN Bonds or the Nigerian financial markets as a whole,” he explained.
Nwankwo recalled that the Bonds market was resuscitated by the DMO in 2003 and was successful, leading to J. P Morgan listing it on its Index in 2012.
He said the Index listing was in recognition that Nigeria was one of the few emerging market countries with a robust domestic market.
The Director-General said that investors who had confidence in the potential of Nigeria and the reforms at their realisation should still see Nigeria as an attractive investment destination.
He, however, said that the government had taken steps to ensure that the economy was stabilised.
“We want to say that the Nigerian economy has proved to be resilient. The government has taken initiatives to ensure short-term stabilisation in terms of the physical position of the various governments in the country and efforts are being made to deal with the long-term effects.
“The efforts are being made to make sure that this market, in the next three to five years, becomes one of the strongest, one of the most sought after, not only in Africa, but in the whole world and we will continue in that pursuit,” Nwankwo said.
He, however, appealed to the media and Nigerians to avoid negative publicity of the Nigerian economy.
“We should not join the bandwagon of speculations and negative sentiment building around the Bonds market and the economy. “They should rather emphasise that the Nigerian Bond market existed before it was listed on the J.P Morgan Index,” he said.
Assuring investors to be calm, he stressed that “DMO is convinced that the expected reduction in foreign participation in the FGN bond market due to the phasing out of Nigeria from GBI-EM will not impact the market adversely.
“Indeed, the share of allotment at the auctions to foreign investors dropped from 15.51 percent in 2013 to 3.34 percent in 2014, yet the market remained stable.”
Admitting that the decision by J.P Morgan to phase out FGN bonds from its index is unwelcome, Nwankwo said: “It does not signify a downturn or the collapse of FGN bonds or the downgrade of the bonds.”
He said there are other avenues investors can participate in Nigeria’s bonds market, adding that Nigeria still exists on Buckley’s capital index apart from JP Morgan.
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