"Nigerian bonds strong despite JP Morgan's delisting"
Earlier this month we reported on JP Morgan's decision to remove Nigeria from its Government Bond Index by the end of October, due to failing its liquidity and transparency tests. Now Nigeria's Debt Management Office has come out fighting, saying that the delisting was largely immaterial to the quality and liquidity of the country's securities.

The Debt Management Office (DMO) says the quality of Nigerian bonds was not affected by the removal of Nigeria from the JP Morgan bond index for emerging markets.

Abraham Nwankwo, director-general of DMO, made the statement at a news conference in Abuja on Wednesday.

He said the federal government’s bonds were strong and robust

J.P Morgan Chase and Co. 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.

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The organisation added Nigeria to its index in 2012 and on January 16, it placed the country on a negative index watch and finally delisted Nigeria on September 8.

J.P Morgan 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 dollars.

According to Nwankwo, 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”.

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“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 FGN bonds were supported by an active secondary market which allowed investors to buy or sell them on any business day.

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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.

He said 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 said.

He said 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.

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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 investors who had confidence in the potentials of Nigeria and the reforms at their realisation should still see Nigeria as an attractive investment destination.

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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,” he said.

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“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.”