The Federal Government has announced the inclusion of selected Federal Government of Nigeria (FGN) Bonds in J.P. Morgan’s newly launched Government Bond Index–Emerging Markets Edge (GBI-EM Edge), describing the development as a major recognition of Nigeria’s economic reforms and rising investor confidence.
According to the Federal Ministry of Finance, J.P. Morgan, manager of some of the world’s most widely tracked emerging market bond indices, disclosed the inclusion of selected FGN Bonds in the new benchmark, which tracks local-currency government debt across frontier emerging markets.
The ministry said Nigeria met the requirements for inclusion based on the liquidity of its domestic bond market and the size of its government bond issuances.
“Nigeria qualified on two key measures: liquidity, with FGN Bonds actively traded under a Two-Way Quote System, and issuance size, with outstanding volumes per tenor well above the USD 250 million minimum required for the GBI-EM Edge,” it said in a statement on Monday. “Nigeria’s weighting in the index is 7.40 per cent, among the highest of the 26 markets covered and close to J.P. Morgan’s eight per cent maximum country weighting.”
The Federal Government said the inclusion reflects the impact of reforms focused on stabilising the naira, addressing the foreign exchange backlog and improving key economic indicators, including GDP growth and inflation.
The development also marks Nigeria’s return to a J.P. Morgan benchmark after more than a decade. The country exited the GBI-EM Global Diversified index in 2015 amid foreign exchange liquidity challenges, which the government said have been directly addressed through the current reform programme.
FGN Bonds were initially included in the GBI-EM in 2012.
According to the ministry, the earlier inclusion helped attract substantial foreign investment into Nigeria’s domestic securities market, reduce issuance costs by approximately 200 basis points, open the equities and banking sectors to foreign capital and support the growth of external reserves.
“The GBI-EM Edge tracks approximately $328 billion in local-currency government debt globally. Nigeria’s 7.40 per cent allocation represents roughly $17.47 billion of eligible FGN debt across 16 instruments,” it stated. “Index-tracking funds are expected to adjust their portfolios to reflect Nigeria’s weighting, which should channel additional foreign portfolio inflows into the domestic bond market over time.”
The ministry said index-tracking funds are expected to realign their portfolios to Nigeria’s weighting, potentially increasing foreign portfolio inflows into the domestic bond market over time.
It added that stronger demand from foreign institutional investors could boost bond prices and gradually reduce domestic yields, potentially lowering the cost of servicing the government’s naira-denominated debt.
The government also said a broader and more active domestic debt market could benefit from the development, as improved liquidity in FGN Bonds is expected to create positive effects across other market segments, including Treasury Bills.
Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, described the development as an independent assessment of the progress achieved through the Federal Government’s reform programme.
“This inclusion is a clear, independent endorsement of the discipline behind President Bola Tinubu’s reform agenda,” Oyedele was quoted as saying. “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.”