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.

J.P. Morgan To Delist Nigeria Bonds

JP-MorganJ.P. Morgan has concluded plans to remove Nigeria from its government bond index by the end of October 2015.

The statement is coming after an earlier removal notice on the absence of currency controls, leading to complicated transactions on the bond.

According to J.P. Morgan, some bonds would be delisted by the end of September, while the rest would be removed by the end of October.

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.

The removal will trigger unprecedented sales of Nigerian bonds, resulting in capital outflows and raising borrowing costs for the government.

Nigeria 2024 bond Yield Eases On JP Morgan Index Inclusion

Money_newYields on Nigeria’s 2024 bond shed 15 basis points to 11.89 percent on Friday, after JP Morgan added it to its Government Bond Index-Emerging Market (GBI-EM), attracting offshore funds, dealers said.

The 10-year benchmark bond opened for trade at 12.04 percent.

Last week JP Morgan said it added Nigeria’s 2024 bond to its emerging market government bond index, in addition to five other bonds already listed, pushing its yield down 22 bps.

Since then, some investors have taken profits, dealers said.

The addition also lifted overall trading volumes on Friday to around 11.5 billion naira ($70 million) on Friday, compared with an average of around 8 billion to 9 billion naira, dealers said.

JP Morgan valued Nigeria’s outstanding bond issues on its index at $13.75 billion.

Zenith Bank In $850M London Listing

Zenith Bank listed $850 million worth of its ordinary shares on the London Stock Exchange as global depository receipts at $6.80, the bank said on Thursday.

One GDR represents 50 ordinary shares, the bank said, adding that JP Morgan is the depository bank, while Citi is the custodian.

“The GDR will allow us to raise money cheaply in the future,” Zenith chief executive, Godwin Emefiele, told CNBC Africa television, at the listing.

Nigerian Economy Is Stable – Finance Ministry

The Ministry of Finance has joined the effort by the Federal Government to re-assure Nigerians that the country’s economy remains on a sound footing, despite the global economic uncertainty.

The Minister of Finance, Ngozi Okonjo-Iweala

The Ministry, in a statement referred to numerous comments and articles in the media, questioning the performance of the nation’s economy as well as casting doubt over the management of the Excess Crude Account and the External Reserves of the country.

While promising to continue to make effort to respond to demands for greater transparency in the management of the nation’s revenues, the Ministry declared that: “the Nigerian economy is strong. Our economic performance is robust when viewed against a whole range of objective factors. Inflation is now down to single-digit at 9.0% in January 2013, compared with 12.6% in January 2012. The exchange rate has been relatively stable, and the fiscal deficit at just under 2% of GDP is on a downward trajectory, and below our threshold of 3% of GDP.

“Our national debt is at a sustainable level at about 19.4% of GDP. Overall, GDP growth for 2012 was 6.5%, and projected at 6.75% for 2013, compared with the projected global growth of 3.5%. The above facts have been independently noted and validated by international ratings agencies (such as Fitch, Standard & Poor’s and Moody’s) who have upgraded the country’s economic outlook, even as other countries are being downgraded. In addition, Nigeria’s bonds have recently been included in the Barclays and JP Morgan Emerging Market indices.”

The ministry urged Nigerians to stop denigrating the efforts being made to correct things that are wrong in the system, maintaining that the current administration is focused on diversifying and growing the economy “through investments in agriculture, housing and construction, manufacturing, aviation, power, roads, rail, solid minerals and the information and communication technology (ICT) sectors by both government and the private sector,” adding that the economy is certainly moving in the right direction.

On the external reserves, the ministry explained the three part components to be made up of “the CBN’s external reserves, the Excess Crude Account, and the Federal Government’s funds belonging to agencies such as the Nigerian National Petroleum Corporation for joint venture cash calls and so on. This is simply a matter of definition, and follows international best practices and reporting guidelines.”

On the claims of inconsistency of account balances provided by the Ministry of Finance and the CBN, the statement said: “It is worth noting that the Ministry of Finance typically reports its balances following Federal Accounts Allocation Committee (FAAC) Meetings, which often take place at the middle of the month, whereas CBN data are reported at the end of each month. There is thus a time lag between the reports from the two institutions.

“As a result, there are usually some differences due to ‘transit items’ which are yet to be reconciled in both accounts. In addition, for quite a while, the CBN excess crude reports have included the $1 billion allocated to the Sovereign Wealth Fund as this is still domiciled with the CBN, whereas the Ministry of Finance does not regard it as part of the distributable Excess Crude Account.”

ACN is myopic

The perception of the Finance Minister has been reiterated by the Senior Special Assistant to President Goodluck Jonathan on Public Affairs, Doyin Okupe who in a statement described the claim by the Action Congress of Nigeria (ACN) that the nation’s economy is in danger of collapse as lacking in substance and runs contrary to the verdicts of reputable international rating agencies who have consistently upgraded the country’s economic ratings in the last one and a half years.
The statement signed by Mr Okupe reads “For a fact, there are incidents of crude oil theft which had existed for several decades before this administration came on board. However, the truth is that this is currently being tackled through proactive steps by the government. The opposition is most probably aware of the fact that President Goodluck Jonathan recently secured the co-operation of the Prime Minister of the United Kingdom and French President on measures to prevent refineries in Europe from buying crude oil stolen from Nigeria.”

“Similarly, the Jonathan administration has provided more and better surveillance boats for the Nigerian Navy to enhance patrol of our coastal waters. This has resulted in arrest of several vessels engaged in oil theft and these were well reported in the Nigerian print and electronic media.”

Mr Okupe drew the attention of the opposition political party to the Petroleum Industry Bill currently before the National Assembly which it says was conceived by President Jonathan to provide for best practice processes for acreage availability, bidding and awards and therefore address the problems of dwindling oil and gas exploratory opportunities, and corruption among other problems in the sector.

“One wonders if the ACN would have ignored the ratings by FITCH, STANDARD & POOR’S, MOODY’S and JP MORGAN if those bodies had turned in a negative verdict on the Nigerian economy. The only conclusion one can draw from this is that the opposition has once again chosen the myopic and jaundiced path of public policy analysis rather that base its assessment on verifiable, objective indices. Unfortunately, a matter as sensitive as a Nation’s economy ought not to be subjected to this fashion of blind politicking.”

While assuring Nigerians that the Federal Government remains committed to implementing sound economic policies and development of the Nation’s infrastructure, the presidency urged politicians to exhibit statesmanship in addressing issues of critical nature rather than seeking to score cheap points in desperate manner.

The Action Congress of Nigeria (ACN) had  raised an alert of an impending collapse of the nation’s economy, unless the Federal Government cuts the ‘astronomical cost’ of running governance and takes urgent measures to diversify the Nigerian economy and shore up the nation’s production of crude oil.

 

Nigeria plans 60b naira in 5-7 year bond auctions

Nigeria plans to issue N60 billion ($379.75 million) in local bonds, with maturities of between five and seven years at its regular auction on September 19, the Debt Management Office (DMO) said on Thursday.

The debt office said it would sell N30 billion  each in re-openings of existing five- and seven-year bonds, which will have terms to maturity of four years and six months, and six years and eight months, respectively.

Yields on local debt have fallen over the past month on news, JP Morgan will include it in its Government Bond Index – Emerging Markets (GBI-EM) from October. The bank says this could potentially bring up to $1 billion into one of Africa’s most developed debt markets.

Nigeria  issues sovereign bonds monthly to support the local bond market, create a benchmark for corporate issuance and fund its budget deficit.

Senate committee discovers illegal NNPC account

The Minister of Finance and Coordinating Minister for the Economy, Dr Ngozi Okonjo-Iweala and the Accountant-General of the Federation, Mr Jonah Otunla have both denied having any knowledge of  details of  operation at the Nigerian National Petroleum Corporation NNPC with  JP Morgan. 


This was revealed on Monday at the continued probe of the fuel subsidy scheme.

The chairman of the panel, Senator Magnus Abe, declared that the JP Morgan account, where proceeds from the sale of crude oil kept unconstitutional and illegal.

He maintained that all revenue accruing to the federation account must be paid into the Federation Account in line with the provision of Section 80 (1) and (4) of the Constitution.

The Minister of Finance denied knowing the account number of the JP Morgan account saying the Ministry only has access to accounts within its jurisdiction.

The new GMD of NNPC, Mr Andrew Yakubu, while admitting he had knowledge of the account said the JP Morgan account is not managed by the NNPC.

The committee directed the Minister of Finance to liaise with the Minister of Petroleum, Mrs Diezani Allison-Maduekwe, to immediately stop the operation of the account.

Dr Ngozi Okonjo-Iweala also revealed that the federal government has paid N451billion for subsidy as at June this year.