Nigeria will probably remain in JPMorgan Chase & Co.’s local-currency emerging-market bond indexes tracked by over $200 billion of funds, according to the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele.
“The main issue was liquidity and we are convinced that liquidity has come up to the level they desire,” Emefiele said in phone conversation with Bloomberg in Abuja.
“It is gone to a range of about $250 million to $300 million a day.”
JPMorgan placed Nigeria on “index watch negative’’ for its GBI-EM indexes on January 16, saying central bank measures in December had reduced foreign exchange and bond trading and made it difficult for investors to replicate the gauge. The NewYork-based lender said it would make a decision within five months.
Nigeria, which derives 90 per cent of export earnings and 70 per cent of government revenue from oil, has been battered by crude prices that have fallen by half since June.
The central bank increased interest rates to a record 13 per cent in November in a bid to stem outflows and stabilise the naira, which has weakened 17 per cent against the dollar in the past six months, more than any of the 24 African currencies.
When that failed, it cut banks’ foreign-exchange trading limits in December to zero from one per cent of shareholders’ funds. The limit was moved to 0.5 per cent on Jan. 22, shortly after JPMorgan’s announcement.
While there is enough liquidity in the currency market for investors to sell their naira assets, the central bank will keep monitoring the market and could raise the so-called net open position limit again, said Emefiele.
“The NOP isn’t cast in stone,” he said. “We could decide to make it one per cent tomorrow or we could decide to make it wto per cent the day after tomorrow.”
Foreign investors increased their naira bond holdings almost fivefold in the year after Nigeria, which has a 1.8 per cent weighting in the GBI-EM indexes, was included in October 2012