From Vanguard via AllAfrica

JP Morgan has threatened to remove Nigeria from its Government Bond Index (GBI-EM) by the year-end unless the Central Bank of Nigeria, CBN, restores liquidity to foreign exchange market to allow foreign investors tracking the benchmark to transact with minimal hurdles.

The bank said, weekend, it had extended the deadline to eject Nigeria by another six months to take into account the arrival of President Muhammadu Buhari.

Nigeria held closely-fought presidential elections in March, in which opposition leader Buhari defeated incumbent President Goodluck Jonathan in the country’s first transition of power through the ballot box.

JPMorgan, which runs the most commonly used emerging debt indexes, placed Nigeria on a negative index watch in January and then said it would assess its place on the index over a three to five months period.

“Nigeria’s status in the GBI-EM series will be finalized in the coming months but no later than year-end,” JPMorgan said.

Implications

Removal from the index would force funds tracking it to sell Nigerian bonds from their portfolios, potentially resulting in significant capital outflows. This in turn would raise borrowing costs for Africa’s largest economy, already suffering from a sharp drop revenue following a plunged in oil prices.

Read more at AllAfrica