Operators in Nigeria’s capital market have lamented the plan by Barclays Bank to delist the Federal Government’s bond from its index, attributing the development to volatile foreign exchange and macro-economic concerns in the country.
US investment banker JP Morgan Chase & Co. announcement last month to delist Nigeria from its Government Bond Index for Emerging Markets (GBI-EM) is already costing the country billions of dollars in lost foreign investment.
The operators were worried over the recent reports that Barclays Bank will consult with its index users on whether Nigeria’s sovereign debt should remain in its emerging market local currency government bond benchmark, According to newspaper reports.
The index provider had said it would drop Nigeria from its index, citing same lack of liquidity and currency restrictions and coming on the heels of the pronouncement by JP Morgan to delist Nigerian bond from its index, says The Guardian.
Already, Barclays has listed Nigeria’s eligibility for inclusion in the Emerging Market Local Currency Government Index among the primary topics to be considered in its yearly review process, according to a statement, though without additional details.
However, the operators have urged the government to take more proactive fiscal measures to restore confidence in the nation’s economy, stressing the need for it to work out modalities that would help to forestall further occurrence.
JP Morgan had, early last August, announced the phased removal of Nigeria from its GBI-EM indices of local currency government bonds for failing its liquidity and transparency tests. The US bank announced last month the remove half of Nigeria’s bond listed on its GBI-EM.
Several analysts were of the opinion that apart from the plug which the decision would put on foreign portfolio investments, the few foreign investors within the system were not unlikely to withdraw.
Nigeria’s central bank governor Godwin Emefiele has been under pressure from foreign investors and Nigerian manufacturers, to further devalue the naira despite the pressure on the currency of Africa’s top oil producer amid the global price crash. They say his policies are worsening the oil-dependent country’s economic woes.
The Naira lost more than 20 per cent of its value between the start of the oil price fall in July 2014 and February, the last time the central bank allowed the currency to depreciate.
Since then, Mr Emefiele has introduced a range of currency controls — doing everything but adjusting the currency to defend its value. The result has been an effective freezing of the country’s foreign exchange market. The lack of liquidity — the ability to move hard currency in and out of the country — was one reason JP Morgan removed Nigeria from its influential emerging markets bond index last month.
President Muhammadu Buhari, who was inaugurated in May, has not yet appointed a cabinet or defined an economic policy to guide the country through the crisis sparked by the oil price crash.
This has frustrated investors who strongly disagree with the monetary policies enacted by Mr Emefiele and argue that in the absence of a fiscal policy, the central bank governor is straying beyond his mandate and intervening in manufacturing policy.