S&P Index: Nigeria’s FG Bonds Rally 16.4% YTD

S&PThe Federal Government bonds tracked in the Standard and Poor’s index has rallied 16.4% in naira terms so far in 2015, a new data released by the U.S. based global rating agency has shown.

The report reveals that FGN bonds gained some seven% in US dollar terms in the current year.

In the month of October alone, Nigerian bonds returned more than 5%, beating the stock market by nearly 24 percent in US dollar terms since the new year started.

The S&P report shows Nigerian government bonds has beaten South Africa and Kenyan government bonds in US dollar terms in 2015.

While Nigerian bonds returned seven% positive on the index, South Africa and Kenya bond indices had been negative by 13%.

Delisting By JP Morgan Not A True Reflection Of The Nigerian Economy – DMO

JP-MorganThe Director General of the Debt Management Office (DMO), Dr Abraham Nwankwo, on Wednesday said that the nations de-listing by JP Morgan from its emerging market bond index is not a true reflection of the nation’s economy.

Speaking at a news conference in Abuja, Dr Nwankwo told reporters that their action must have been informed by the crash in the price of oil.

He said that the nation’s economy has remained resilient compared with that of other oil exporting countries, stressing that the federal governments bond is still vibrant.

According to Nwankwo, Nigeria’s removal from the index “does not amount to a downgrade of Nigeria or FGN Bonds since JP Morgan is not a credit rating agency.

“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.’’

Liquid Currency Criteria

The index provider said Nigeria would not be eligible for re-inclusion in the index for a minimum of 12 months. It added that to get back in the reading, Nigeria would have to satisfy the consistent liquid currency criteria.

Meanwhile, the Central Bank of Nigeria, in reaction to the notice, said “it disagrees with the index expulsion”.

The apex bank also said it had started to improve liquidity and transparency in the market, just as foreign exchange traders confirmed that U.S. Dollars rationing to foreign investors has begun.

Nigeria became the second African country after South Africa to be listed in J.P. Morgan’s emerging government bond index, in 2012. Its inclusion adds a 1.8 per cent weight to the index.

JP 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.

JP Morgan added Nigeria to its index in 2012 and on January 16, it placed Nigeria on a negative index watch and finally delisted Nigeria on September 8.

JP 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.

Nigeria’s debt is now N6.88 trillion…. DMO

The total debt profile of Nigeria now stands at $44.28bn (N6.88tn), according to the Debt Management Office (DMO).

Statistics obtained from the DMO revealed that the domestic debt component of the total indebtedness stood at $38.37bn (N5.97tn), while the external debt stood at $5.91bn (N919.44bn) as at March 31, 2012.

Details of the external debt balance showed that multilateral financial institutions accounted for 83.28 per cent of the country’s total debt with the International Bank for Reconstruction and Development-a member of the World Bank Group-is owed $6.31m.

Another member of the group, the International Development Association is owed $4.29bn while the International Fund for Agricultural Development is owed $70.25m.

The African Development Bank is owed $43.55m, while the African Development Fund is owed $387.23m.

Non-Paris Club debt sources account for 8.26 per cent of the nation’s external debt, which includes European Development Fund, $110.08m; and the Islamic Development Fund, $14.56m.

Bilateral loans account for $433.84m, while commercial loans contribute $54.63m.

The $500m, which Nigeria borrowed from the International Capital Market in 2011, accounts for the remaining 8.26 per cent of the external debt.

Details of the domestic debts, on the other hand, showed that FGN bonds accounted for N3.67tn or 61.44 per cent of the money borrowed by the Federal Government from internal sources.

Nigerian Treasury Bills account for N1.95tn or 32.63 per cent, while treasury bonds account for N353.73m or 5.93 per cent.

As at March 31, 2011, the nation’s external debt stood at $5.23bn, while the domestic debt stood at N4.87tn.

This means that within a one-year period, the external debt stock rose by 13 per cent, while the domestic debt stock rose by 22.59 per cent.

The Federal Government had recently disclosed to the National Assembly its plan to borrow $8bn from external sources for infrastructure development.

If the loan request is approved, the country’s foreign debt will grow to $13.91bn.