Abuja: The Debt Management Office (DMO) has described the inclusion of FGN bonds in J.P. Morgan’s new Index for locally issued bonds as an attestation to the positive outcomes of President Bola Tinubu’s economic reforms. J.P. Morgan, a top international bank that manages the most widely used global Bond Indices, had announced the creation of a new Index for locally issued bonds.
According to News Agency of Nigeria, the Director-General of the DMO, Patience Oniha, stated that reforms such as the stability of the Naira exchange rate have made Nigeria an attractive investment destination for foreign investors. Oniha highlighted that the clearance of the foreign exchange backlog, along with improvements in the economy, including GDP growth and inflation trends, has further enhanced the appeal of the Nigerian economy to investors.
“Nigeria met specific criteria for inclusion in the Index, which are liquidity. FGN Bonds are actively traded under a Two-Way Quote System, and large volumes of bonds per tenor, well above the minimum of 250 million dollars required for the GBI-EM Edge. Nigeria’s weight in the Index, which includes 20 countries, is 7.41 per cent. This is, however, the first step towards the inclusion of FGN Bonds in J.P. Morgan’s flagship GBI-EM, expected in 2027,” Oniha explained. She affirmed the Federal Government’s commitment to the economic reform agenda and other initiatives aimed at national development.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, remarked that the decision reflects growing confidence in Nigeria’s economic management. According to Oyedele, the development will help lower the cost of financing the government’s development priorities. “This inclusion is a clear, independent endorsement of the discipline behind Mr President’s reform agenda. It reflects the confidence international capital markets now place in Nigeria’s economic management, and it lowers the cost of financing our development priorities,” he stated. He emphasized the government’s focus on further reforms needed to secure Nigeria’s full reinstatement in J.P. Morgan’s flagship index.
FGN Bonds are fixed-income debt securities issued by the DMO on behalf of the Federal Government. They enable investors to lend money to the government to finance infrastructure, public projects, and national budget deficits. Backed by the full faith and credit of the Federal Government, FGN bonds are considered risk-free debt instruments with zero default risk on principal and interest payouts.
NAN reports that J.P. Morgan announced the creation of the Global Bond Index, Emerging Markets (GBI-EM) Edge, which would include Federal Government of Nigeria (FGN) Bonds. According to J.P. Morgan, Nigeria is one of only three countries, alongside Kazakhstan and Egypt, whose local currency Bonds are being considered for inclusion in the Index in 2027. NAN notes that selected FGN Bonds were previously included in the GBI-EM in 2012, which brought multiple benefits, such as attracting foreign investors to the domestic FGN securities market and reducing the cost of issuance by about 200 basis points. It also opened up foreign investments in the equities market and the banking sector while increasing the level of External Reserves. However, Nigeria exited in 2015 due to foreign exchange liquidity issues, which the Federal Government has largely addressed.