The Director General of the Debt Management Office (DMO), Dr. Abraham Nwankwo, on Wednesday reassured Nigerians that the recent announcement by JPMorgan Chase & Co. to phase out Federal Government of Nigeria (FGN) Bonds from its Government Bond Index-Emerging Markets (GBI-EM) would not have a negative impact on the country’s bond market.
He said even though the share of allotment at the auctions to foreign investors dropped from 15.51 per cent in 2003 to 3.34 per cent in 2014, the domestic bonds market has remained stable and internally-driven.
He said although the announcement by the US investment bank to delist Nigerian bonds starting from September 30 was unwelcoming, it did not in any way signify a downturn or collapse of the local bond market and would not downgrade the bonds.
Nwankwo stated that JPMorgan’s decision was not necessarily guided by its perception of Nigerian bonds but by the activities in the foreign exchange market, which it claimed lacked a fully functional two-way quote system and had limited transparency.
Speaking to journalists at a media briefing organised to provide further clarification on the proposed delisting, he argued that since the Nigerian bond market had been successfully developed and diversified before JPMorgan sought to include it on its indexes in 2012, delisting Nigerian bonds would have almost no impact on the quality of securities in particular and the local market in general.
The DMO boss said the exclusion of Nigeria from the index would not also connote that the domestic market was weaker, stressing that the bond market has a predominantly well-diversified domestic base that can offset any external shock.
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