Connect with us


CBN Reacts to J.P. Morgan’s Decision to Phase Out Nigeria from its Government Bond Index



Godwin Emefiele - Bella Naija

J.P. Morgan recently announced its decision to phase out Nigeria from its Government Bond Index for Emerging Markets (GBI-EM).

In reaction to the development, Central Bank of Nigeria (CBN) has released a statement expressing that although it respects the decision, it disagrees with the premise upon which the decision was taken, Prompt News Online reports.

Here is the statement:

The attention of the Federal Ministry of Finance (FMF), Central Bank of Nigeria (CBN), and the Debt Management Office (DMO) has been drawn to today’s announcement of the decision by J. P. Morgan to phase out Nigeria from its Government Bond Index for Emerging Markets (GBI-EM).

While we respect the right of the J.P. Morgan to make this decision, we would like to strongly disagree with the premise and conclusions upon which the decision rests.

It would be recalled that Nigeria was included in the index in October 2012, based on the existence of an active domestic market for FGN Bonds supported by a Two-Way Quote System, dedicated Market Makers and diverse investors.

However, in January 2015, J.P. Morgan placed Nigeria on an Index Watch as a result of their concerns in the operations of our Foreign Exchange (FX) Market, namely: 1) lack of liquidity for transactions; 2) lack of transparency in the determination of the exchange rate; and 3) lack of a fully functional two-way FX Market.

In our continuous bid to strengthen the Nigerian financial market and enhance our status as a preferred destination for investors, we took measures to improve the market. Despite the fact that oil prices have fallen by nearly 60 percent in one year, which should expectedly reduce the amount of liquidity in the market, the CBN ensured that all genuine and effective demand were met, especially those from foreign investors.

On transparency, the CBN mandated that all FX transactions were posted online in the Reuters Trading Platform so that all stakeholders can easily verify all transactions in the market. In addition, the Official FX Window at the CBN was closed to ensure a level-playing field in the pricing of foreign exchange.

It is important to note that a functional two-way FX market already exists in Nigeria. However, given the high propensity for speculation, round tripping, and rent-seeking in the market, it became imperative that participants are not allowed to simply trade currencies but are only in the market to fulfil genuine customer demands to pay for eligible imports and other transactions. In the light of this, we introduced an order-based, two-way FX market, which has resulted in the stability of the exchange rate in the interbank market over the past 7 months and largely eliminated speculators from the market.

Despite these positive outcomes, the J. P. Morgan would prefer that we remove this rule; even though it is obvious that doing so would lead to an indeterminate depreciation of the Naira. With dwindling oil prices, we believe that an order-based two-way market best serves Nigeria’s interest at the moment.

While we would continue to ensure that there is liquidity and transparency in the market, we would like to note that the market for FGN Bonds remains strong and active due primarily to the strength and diversity of the domestic investor base.

For the avoidance of doubt, the Federal Government sees Nigeria and the interest of Nigerians as paramount. It will therefore only continue to take economic decisions that will impact positively in the lives of all Nigerians.


  1. Ndubuisi

    September 9, 2015 at 11:57 am

    JP Morgan removing Nigeria in the developing market bond index does not matter at all Nigeria CBN and financial institutions should not worry about it. The reason why Nigeria as an economy is not doing well is we are not producing anything at all not in Agriculture, realestate or industrialization because of that there is high inflation that is hurting our economy. To solve Nigeria problem we need to go into realestate and Agriculture massively this is the sector Nigerians and the government can start now we don’t need when there is 24hrs before that all we need is to start. For example in Agriculture we are nearly importing everything including tomatoes and rice for Gods sake. Then 2nd is realestate currently Nigeria is having a 17 million housing shortage that can be solved in the next 10 yrs with a massive housing project in all stage and it will create jobs and make people who can afford to have there own house get one through morgage.

    • ElessarisEllendil

      September 9, 2015 at 12:20 pm

      Phew, here I was already arranging arguments in my head against the “pro-market”, non interventionist crowd.

    • mywifeisfiiiiiiine

      September 9, 2015 at 2:56 pm

      Should the housing market be funded by private interests or govt? If you say private interests, then the private interests have to source funding and unfortunately Nigerian banks don’t have the liquidity to fund 17million houses, and even if they do, you and I know what the interest rate is like. With that comes higher housing costs which prices out those who need it in the first place. Also if the private sector wants to source for funding from outside the country, they have to borrow which could also be in form of bonds, now if the foreign investors feel that there is liquidity issues in Nigeria meaning we no get money to spend. They will reach two conclusions, the investment may not be viable and hence no deal, or it is risky and if we must put our money then we must get something good for it, queue in higher interest rates, queue in higher housing costs, queue in pricing out those who really need it. If you are a proponent for Govt to build and transfer or atleast provide the funding to investors, Govt still has to source for funds and in turn lend to private investors. Where does Nigeria get majority of her money from? Queue in oil. Now oil prices are going to shit and with all the mirage of problems Nigeria faces the government still needs to look elsewhere for the money, which means borrowing. Which brings us back to the JP Morgan issue; if international investors believe a govt is having liquidity issues, they have two options, they can either say no we can’t or yes we can lend Nigeria the money by buying her bonds but at a higher interest rate, so don’t celebrate much. It ain’t yet Uhuru, bubus body language can’t fix this one.

    • ElessarisEllendil

      September 9, 2015 at 3:17 pm

      Paragraphs please! Good points though.

    • Bobosteke & Lara Bian

      September 9, 2015 at 4:03 pm

      I’m a little confused, please. Do you mean cue or queue?

    • mywifeisfiiiiiiine

      September 9, 2015 at 4:37 pm

      Feel free to make corrections as you read along, and as you do so I hope you Learn a thing or two about the economy. Thanks

    • nnenne

      September 9, 2015 at 8:37 pm

      You nailed [email protected] mywifeisfiiiiiiine.
      We Should Worry. Why did we include our name in the first place?
      Something is got to be done. May not be for immediate results but for results in the future.

    • Bobosteke & Lara Bian

      September 10, 2015 at 4:39 pm

      My question was in no way meant to reflect any tardiness on your part. If you had taken time to read an earlier comment I made on this post, I thanked both you and @ElessarisEllendil for making a rather complicated topic (for me) clearer.

      I am familiar with your comments and hold you in higher regard than the carefully worded barb your response was intended to be. Both “queue” and “cue” seemed to fit in perfectly(depending on your interpretation of the sentence), hence my dilemma; not because I found your quite knowledgeable post faulty.

      I will not be careful in requesting further clarification from you in future whenever the need arises and I trust you would be able to tell the difference between pettiness and just plain confusion from a commenter when you see it.

    • Drknite

      September 9, 2015 at 3:48 pm

      Well said!

    • lauren

      September 9, 2015 at 9:11 pm

      I concur. We need to take a cue from China and start looking internally for resolutions to our economic problems. I’m always amused when Nigerians moan about the falling Naira against the dollar or pound as though we are even in real contention and the rates are some kind of report card.
      Manufacture! Produce! Export and close the damn borders.

    • Delta geh

      September 10, 2015 at 4:49 am

      I agree with your agriculture suggestion but I don’t know about the real estate part. Agriculture is really the way forward. Highly underestimated in our dear country. Everyone looks down on it but it will make our economy less reliant on oil thereby increasing stability. As for real estate, my wifeisfine hit the nail on the head. Who would finance? Also, I don’t know if it’s viable in the long term.

    • Free Spirit

      September 10, 2015 at 3:12 pm

      I agree with you what you have said but the problem is not importation. The problem as you have rightly said is production and manufacturing. The two issues are mutually exclusive! The reason why the cost of production and manufacturing is high has nothing to do with importation! If we are serious about Agriculture, Manufacturing, Production, we have to be ready to compete with the rest of the world. What irks me the most is that after everything is said and done the current plan in its current form is bound to fail. If you make policies that discourage importation and no policies that encourage production and effective distribution sold at competitive prices with the rest of west Africa then your neighbours would take advantage of your porous border to attract these investors and smugglers would still continue to bring this same product products in with impunity thereby undermining your policy.

  2. Mems

    September 9, 2015 at 11:58 am

    Well said sir! We don’t always have to do what pleases the general market. Sometimes, short term discomfort yields long term rewards. Nigeria is undergoing labour pains…we shall birth a better economy soon.

  3. Free Spirit

    September 9, 2015 at 12:18 pm

    There you go! St*pid CBN Governor! Do you think that your silly policies do not have real effect in the global markets! It does not work the way you read in your economic textbook because we have an imperfect market and there are real life factor that need to be considered when making policies no matter how good your intention may be! Address problems holistically and stop ignoring the big elephant in the room our porous border (customs)! No where in the civilised world are international transactions left at the mercy of the black markets.

    • ElessarisEllendil

      September 9, 2015 at 12:34 pm

      On one hand you argue about “real life” policies and on the other you advocate a policy that will devalue the currency, deplete the nation’s reserves and drive up inflation. You’re also doing this to a heavily import reliant economy who’s main export value is nosediving. Who is stuck in their Economics texts I wonder??

    • Free Spirit

      September 10, 2015 at 3:30 pm

      @Elessaris, the current value of the naira is a façade. It’s as a result of the policies of the CBN. Countries in the global market are not dumb. More people would dump the naira in global markets as a result of this inconsistent policy.

    • Free Spirit

      September 10, 2015 at 5:06 pm

      I also would like to point out to you that I have not advocated any policy. Please read carefully before you respond! it already shows your bias in the matter when you jump to conclusions when responding to a point of view. I simply disagreed with the current policy in it’s the current form. Now I do not disagree with the intention and I do appreciate the precarious situation that the countries economy is facing however, implementing a plan that is bound to fail eventually is not my idea of a solution. Leaving international transactions at the mercy of the black market is not my idea of a solution!
      You might probably ask me what my own great solution is and I would tell you I prefer a sincere solution that has taken into consideration all mitigating factors and all stakeholders.

    • Free Spirit

      September 10, 2015 at 6:20 pm

      I also would like to point out to you that I have NOT advocated any policy. Please read carefully before you respond! it already shows your bias in the matter when you jump to conclusions before comprehending the post.. I simply disagreed with the current policy in it’s the current form. Now I do not disagree with the intention and I do appreciate the precarious situation that the country’s economy is facing however, implementing a plan that is bound to fail eventually is not my idea of a solution. Leaving international transactions at the mercy of the black market is not my idea of a solution!
      You might probably ask me what my own great solution is and I would tell you I prefer a sincere solution that has taken into consideration all mitigating factors and all stakeholders.

    • Mbaks

      September 9, 2015 at 1:00 pm

      Why is it difficult for some ppl to oppose an opinion without resorting to insults??

    • Tosin

      September 10, 2015 at 8:45 am

      I don’t know if it’s an insult o.

  4. ElessarisEllendil

    September 9, 2015 at 12:30 pm

    Government Bonds are debts, simple! Basically:

    Person A: “Hey, can I borrow some cash? I’ll pay back next month, I swear.”

    Person B: “What’s in it for me?”

    Person A: “Next month I’ll give you more than I borrowed. I really need the money now, and it’s worth it to me to have to pay you more next month.”

    Person B: “It’s a deal.”

    What are the risks? It leads to “Greece”!, it leads to low currency values and finally it drives up inflation, note isn’t Nigeria’s nearly at 10%??

    In all this remember, the CBN exists for one sole purpose, to control inflation and keep the naira stable.

    Just thought I could provide some context, personally I’m backing Emefiele on this one.

    • MEE

      September 9, 2015 at 1:47 pm

      Hehe…it leads to Greece, nice one!

    • mywifeisfiiiiiiine

      September 9, 2015 at 2:41 pm

      What you have also failed to mention is that by taking us off the list shows that they think we are not credit worthy; lack of liquidity means less or no income. While it is good to borrow less, what happens when we really need to borrow? Don’t celebrate just yet, Nigeria is not a power house, the Government of Nigeria will not be defending the premise of liquidity given by JP Morgan if it wasn’t important. In lending, perception is everything, when our economy is suspect it leads to only one thing, higher interest rates; because of capital flight. Investors start to run away because they think the economy will tank, those who decide to stay or come in will only do so if the risk is worth it, queue in higher interest rate. We are an import dependent country, stifling the forex market is already causing shortages in some commodities, queue in higher prices. So until Bubus body language can fix all this, we are heading for the hills, whether we tip over to fall of no return remains to be seen.

    • ElessarisEllendil

      September 9, 2015 at 3:59 pm

      Economically, there’s nothing wrong with borrowing. However borrowing only makes sense when its properly invested in infrastructure and not government officials pocket. Our only realistic choice is to put a freeze on borrowing, liberalize further and prepare for a little austerity. It is my hope our leaders aren’t bullied into further devaluations. I’m biased though.

    • lauren

      September 9, 2015 at 9:28 pm

      Interestingly, similar bells tolled for China in the early 80s. They reached the bottom and steadily climbed to the very top by formulating and implementing (very vital) socio economic reforms that were heavily ridiculed by the West and the Chinese themselves. Economic recovery should be our focus right now. From what I’ve seen so far there have been some changes in the right direction. I’m no finance expert but I don’t think that these sort of sound bites should be seen as conclusive. Neither should they discourage us.

    • lauren

      September 9, 2015 at 9:32 pm

      Bad credit? Don’t borrow. We can afford it and Buhari knows that hence the focus on corruption. To free up the funds we need so we don’t have to borrow.

  5. funmi

    September 9, 2015 at 12:47 pm

    hi @free spirit….. you really do not have to call anyone stupid to prove your point you know

    • Free Spirit

      September 10, 2015 at 4:00 pm

      My Apologies to the CBN governor using such a word but I hate when technocrat implement textbook idea without considering the full effects or ramifications (Even a JS3 student would consider doing a SWOT Analysis on their plan). If the intention behind his policies is to encourage production, manufacturing & agriculture then his water tight plan is leaking all over the place. Our borders are extremely porous and until its verifiable confirmed that security has improved, Mr emefiele plan in its current form would fail plus Nigeria would lose billions in revenue to our neighbours. They need to go back to the drawing board and come up with a more holistic plan.

  6. Mbaks

    September 9, 2015 at 12:57 pm

    “For the avoidance of doubt, the Federal Government sees Nigeria and the interest of Nigerians as paramount. It will therefore only continue to take economic decisions that will impact positively in the lives of all Nigerians.” SHEKINA!!!

    We are behind you sir!

  7. Ivy Nils

    September 9, 2015 at 2:16 pm

    Nigeria on a downward spiral….., what do you expect when you have DOD (Dullard of Duara) at the helm of affairs, no economic policies in place, we are in for a very rough ride, all we hear is “kwaruption, kwaruption”, inflation has raisin from 7% to 9.2% in 3months, doller and pounds are at an alarming rate.

    Like it or not we made the list in 2012, that was GEJs tenure, we were on a slow but steady rise, GEJ had his weaknesses but at least we were finally making a headway.

    Corruption is a distraction, like it or not 90% of politicians, top military personals, top civil servants are all involved, this makes it a wild goose chase, all he needs do is set the right policies in place, i also subscribe to those that are seeking the death penalty, on coruption.


      September 9, 2015 at 3:10 pm

      Ivy Nils. Because over 90% of govt officials are corrupt doesn’t mean that a fight against it is a goose chase. And in response to your last sentence, No matter how good your policies are as a nation, development will not exist because of a corrupt system. May God help this man you call dullard to help us restore our image and put ous on the right path. And talking about GEJ and 2012, your biased perspective did not even allow you to read the article well. Please who was your president at Jan 2015? What was the reasons they gave for putting us on watch.

    • ElessarisEllendil

      September 9, 2015 at 3:55 pm

      Chai!!!!!!!!!!!! See Lies!!! So if I don’t read Monetary Policy Communiques, this is how you would have been feeding us Beans!!

      Link to the MPC communiques above, food inflation was a;ready at 9.5% as at 19th May, while inflation rate was 8.7%. Your bogus numbers prevent me from taking the rest of your writeup seriously.

    • lauren

      September 9, 2015 at 9:37 pm

      Geez Ivy

    • Calvin Broadus

      September 9, 2015 at 10:17 pm

      what headway? oh I remember, the statistical engineering that suddenly made us biggest economy in Africa.

  8. Bobosteke & Lara Bian

    September 9, 2015 at 3:59 pm

    Not really being a numbers person, I read this post with little or no understanding. But I knew people would come through in the comments section.

    So many, many thanks to @mywifeisfiiiiiiiine and @ElessarisEllendil for making it less obtuse.

  9. Tosin

    September 9, 2015 at 4:36 pm

    dey ah lizzning, don worry.

  10. nene+

    September 9, 2015 at 5:24 pm

    CBN governor please use your text books! What do you mean it doesn’t matter?

    Where we better off with JB Morgan? Yes we were! Now removing us is to Nigeria’s detriment now but it’s okay because it’s buhari?

    Nigerians never cease. to amaze me! No economic team, no FX transfers, banks sacking and considering sacking? And people are saying it’s all good?

    Shame on hero worshipper who chants sai baba in the midst of gross economic back tracking! Buhari has failed woefully on our economy in three months Nigerians have lost what they achieved in 16 years!

    Nigerians keep voting Nepa bill certificate holder! As for me and other well meaning Nigerians who value education, until we see an educated technocrats, we will stay at home on election day. Had Buhari had an NCE or even OND certificate, he would have since set up his economic team to prevent these unnecessary financial losses. What do you expect from a man with 150 cows for 73 years, no shares save some units forced on him and Nigerians where happy to have a gigantic failure as president calling him Africa’s poorest? Is that a positive title?Mtcheew

    • lauren

      September 9, 2015 at 9:16 pm

      You failed to make a valid point. How and why does it matter that a foreign financial institution that has had its own coffers looked into, declares us ‘unsuitable’?
      You exalt yourself then proceed to trash an elected sitting president. Very rude.

    • Don Pafegs

      September 9, 2015 at 9:26 pm

      @nene+, you only came to make a comment that either displays your inability to understand what you read or your hate for baba. Or maybe both. I also thought your academic background would be useful in areas of understanding how CBN works. This is not a baba policy and the man behind this policies was a CBN governor before baba came. Moreover, the article states that we were put on watch Jan. 2015…check it out nah…For what reasons. Please read again!

    • Idomagirl

      September 10, 2015 at 3:27 am

      Easy o, make dat bile no choke you.

    • Cetoo

      September 10, 2015 at 10:08 pm

      That is eh. The girl has some serious issues o. Ha… Biko kwa. Nne nwayo.

    • Tosin

      September 10, 2015 at 8:42 am

      Just to help you, this is what the CBN gov is trying to say that his oga at the top has said:

      It is not by dogon turanci, it’s not by economic, fiscal, monetary, financial abunan, but by the body language of the commander-in-chief. All the Holy Body requires is no distraction, so that one by one he can take down Boko Haram, destroy corruption, and get unemployed youths to embrace agriculture.

      Be patient. I am sure our brothers in the BJ Morgan also understand, and that is the purpose of the lucid message above.

  11. Concerned_Boyfriend

    September 9, 2015 at 5:46 pm

    Love the intellectual banter between ElessarisEllendil and mywifeisfiiiiine. This is exactly why news blog sites like BN are successful not the stories or the wedding photos. There success lies in faceless individuals like you and me contributing to their content. Even with the enormous growth of viewership on this site, they still haven’t capitalize on this growth…I’m going to leave that for anther topic, I do offer consultation on User Interface Design and Web Development… Holla if you need me..

    Meanwhile, make una carry go…I learned alot today about central banks and monetary policies..

  12. Tee

    September 9, 2015 at 6:46 pm

    @mywifeisfinnneeeee Intelligence is sexy ….lol yes I’m lowering the tone ..and i took it there he he he *hides face and runs away*

  13. OJ

    September 9, 2015 at 11:14 pm

    JP Morgan, Lehman brothers, HSBC, US federal reserve, bank of america….hen, which one again oooo, but they are not much nah, yet they control the entire the US, US wants to control the entire. when those banks failed, the whole western world almost collasped….because they run things from wall street. Nigeria should do whatever it deems good to improve her economy even if it means dissociating herself from these so called western powers

  14. Feyi o

    September 10, 2015 at 3:42 pm

    I knew this was coming..CBN losing its credibility of recent. . CBN has been releasing circulars like its church bulletin. Before you try to comply with one there is another. **mscheeew** When you make another currency scarce to get in response to saving your currency (in the midst of high rate of importation), you are invariable devaluing your currency. You first should identify the areas where people are pumping the forex into and tackle that rather than going straight to regulate the demand for forex. If not, the demand for forex increases because people still need to fund these importations, with limited supply which will further devalue the naira. U ever wonder why the dollar or Euro sustains its value, It is because there is negligible importation in their country hence no reason to want forex. If u address this, then leave invisible hand to do its natural regulatory work. There is no need for this level of regulation from the Government on forex policy

    • Free Spirit

      September 10, 2015 at 5:34 pm

      Exactly! The end result would still be the devaluation of the with little or no increase in production, manufacturing or Agriculture.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Get The Pan-Atlantic Advantage

Star Features