Nigeria’s Return to JP Morgan’s Index Imminent as NAFEX Attracts $45bn in 1yr

The readimission of Nigeria into the J.P Morgan Government Bond Index-Emerging Market (GBI-EM) is imminent following the successful operation of the Investors and Exporters (I&E) window for one year with turnover of $45 Billion.

Citing lack of liquidity and transparency in the country’s Foreign Exchange Market, due to restrictions imposed by the Central Bank of Nigeria (CBN), J.P Morgan in October 2015 ejected Nigeria from its GBI-EM, which tracks local currency bonds issued by emerging market Governments. This prompted foreign investors to sell off their holdings of Nigeria’s bonds.

Nigeria, according to J.P Morgan, would be eligible for re-inclusion if it could establish that it had upheld the inclusion criteria for at least 12 months. This means the authorities must restore liquidity to the Forex Market in a way that allowed foreign investors tracking the index to conduct transactions with minimum hurdle.

This week marks one year of the successful operation of the I&E window introduced by the CBN on April 21, 2017, to boost liquidity in the Foreign Exchange market and ensure timely execution and settlement for eligible transactions. Transactions commenced on Monday April 24, while the FMDQ introduced the Nigeria Autonomous Foreign Exchange Rate (NAFEX) as reference rate for the window.

In a circular issued on April 21, 2017 introducing the window, the CBN stated that eligible transactions in the window include: Invisible transactions (excluding International Airlines Ticket sales’ remittances), Loan repayments, loan interest payments, dividends/income remittances, capital repatriation, management services fees, consultancy fees, etc; Bills For Collection and; any other trade-related payment obligations (at the instance of the customer).”

The Apex Bank further stated that “the supply of foreign currency to the window shall be through portfolio investors, exporters, authorised dealers and other parties with foreign currency to exchange to Naira. The CBN shall also be a market participant at this window to promote liquidity and professional market conduct.”


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