http://nairametrics.com/jp-morgan-index-list-of-possible-implications-when-nigeria-is-evetually-kicked-out/

Harsh times await this country as we have been kicked out of the Bond Index making it difficult to maintain government liquidity due to the capital controls by Emefiele and no Finance Minister to lay a solid fiscal policy. I fear about social unrest.

Pray for Nigeria.

By Chijioke Ohuocha

(Reuters) - JP Morgan will remove Nigeria from its Government Bond Index (GBI-EM) by the end of October, the bank said on Tuesday, after warning the government of Africa's biggest economy that currency controls were making transactions too complicated.

The removal will force funds to sell Nigerian bonds, triggering potentially significant capital outflows and raising borrowing costs for the government.

Struggling with a plunge in vital oil revenue, Nigeria had imposed currency restrictions to defend the naira after the burning of dollar reserves failed to halt a slide.

The JP Morgan index tracks around $210 billion in assets under management.

Some bonds will be removed from the index by the end of September and the rest by the end of October, JP Morgan said.

The bank had warned Nigeria that to stay in the index, it would have to restore liquidity to its currency market in a way that allowed foreign investors tracking the index to conduct transactions with minimal hurdles.

Nigeria became the second African country after South Africa to be listed in JP Morgan's emerging government bond index, in October 2012, after the central bank removed a requirement that foreign investors hold government bonds for a minimum of one year before exiting.

The index added Nigeria's 2014, 2019, 2022 and 2024 bonds, giving Africa's biggest economy a weight of 1.8 percent in the index.

"Foreign investors who track the GBI-EM series continue to face challenges and uncertainty while transacting in the naira due to the lack of a fully functional two-way FX market and limited transparency," the bank said in a note.

The central bank had to devalue the naira and pegged it at a fixed rate against the dollar, turning trading into a one-way quote currency market whose lack of transparency upset investors and businesses.

The index provider said Nigeria would not be eligible for re-inclusion in the index for a minimum of 12 months. To get back in, it would have to establish a consistent record of satisfying the index inclusion criteria, such as a liquid currency market.

Nigeria's Finance Ministry, central bank and Debt Management Office said in a statement they "strongly" disagreed with the index expulsion, saying that market liquidity was improving.

http://mobile.reuters.com/article/idUSL5N11E3Y320150908

No need to be alarmed. We will get back in

for we Wey go Arabic skul like the president, wey no understand Weytin JP Morgan talk nkor?

abeg mk una explain m for us!



in another news.. .APC blames PDP for inciting JP Morgan against Nigeria!



I am JAZINOGOLD, and I just want to make common sense!

http://nairametrics.com/jp-morgan-index-list-of-possible-implications-when-nigeria-is-evetually-kicked-out/


The current Buhari Government has been taking credit for some of the policy initiatives carried out by Goodluck Jonathan Government such as stable power, the Treasury Single Account, tax initiatives, war on terror, renewal of strong diplomatic ties with the US etc. The Buhari Government is also not relenting in calling out the past government for its bad policies and alleged corruption. This development will now give critics of the current government, the opposition party and sympathisers of the past government enough armory to blame the current government.

They will surely blame the Buhari government for not acting swiftly enough to stop the decision of JP Morgan considering that it issued the threat about 9 months ago. They will also say it is because of the slow mode of operation of the current government (which for example has not announced a cabinet more than 100 days after being in office) that has made the CBN Governor act alone thus portraying the country as one without an economic direction. This will cost the president a lot of political capital as even his supporters must now be jittery.

Bond Yields

When Nigeria borrows money by selling bonds they pay investors based on the on prevailing bond yields. For example, a unit of a bond priced at N1000 may have been originally sold at an interest rate of 10%, that is N100 per N1000. With Nigerian thrown out of the index holders of that bond could dump it and sell for lower than N1000 per paper just to exit. If the average price drops to N800 due to high volume of sellers then that interest rate of 10% is now 12.5%, that is N100 dividend by N800.
This means the next time the Nigerian Government goes out to borrow it will no longer attract a 10% yield but will now borrow from investors at a yield of 12.5% or even more. This will cost the government more money in servicing interest thus taking money it could have used for capital projects for debt servicing.

Lack of foreign demand

By taking Nigeria off the index, there will be little or no demand for our bonds from foreign investors. Already, since JPM threatened to yank Nigerian off back in January, foreign holding of our bonds has dropped from a peak of $11 billion in 2013 to $3 billion today. It is therefore likely that this may even shrink further thus affecting the demand for our debts. A lack of demand for our debts means yields may even get higher as fewer investors will now sought for our bonds

Gain for other emerging markets

With Nigeria out of the scene, other emerging markets in Africa like Ghana, Kenya and even South Africa could now be more attractive to investors. They will simply now move their funds to competing countries leaving Nigeria in its wake. Since investors like to follow the money, it is also likely that other forms of investments may elude Nigeria because of this singular move.

Prestige and Clout

With the above happening, Nigeria will lose its prestige as not just the largest economy in Africa but the economy attracting the most foreign investments. This will be damaging to an economy that has been thumping itself as the destination to be for foreign investors.

Corporate Bonds

Local companies and banks also borrow money from foreign investors by selling foreign denominated bonds and also Naira bonds. Now that the Federal Government is likely to see their borrowing cost go up due to this development, it is likely that banks and other corporates seeking to borrow may have to pay more in interest as well. Some companies may not even have the courage to borrow with bonds again due to high lending rates and may result in some companies gets starved of funds so much that they may start to incur losses or even fold up. For those that have even borrowed refinancing such loans will now be expensive as yields have already gone up.

Higher lending rates

For the banks that are lucky enough to borrow, they will have to pass on that cost to someone else. Small businesses which rely on banks for small loans such as overdrafts, local purchase orders, letters of credit etc. may also see their borrowing rates rise even higher. For individuals with consumer loans they may also be expecting a letter from banks telling them that their loan rates have gone up.

Foreign Currency Cost

It is also likely that foreign currencies will cost more to use due to this action. Holiday makers or business travelers who use their cards abroad for foreign denominated transactions may also see themselves paying more whenever they spend their naira debit cards. Since some banks also channels some of their foreign borrowings in the forex market it is likely that they will charge end users more to recover the higher cost of borrowing.

Shallow market

With the exit of most foreign investors the long term plan of the Debt Management Office of ensuring that our bond market is deep is now in jeopardy. With little demand, it is unlikely that the government and other private companies seeking foreign currency loans will use the bond market as a possible source. This will make the market shallow and unattractive and could even throw some companies out of business. For example, Fund Sourcing Companies, Legal Advisers and other consultants may witness a huge reduction in deals thus affecting their revenues.

Ripple Effect

The Nigerian stock market which has seen some bullish trends in recent days may also be negatively impacted. With this announcement it is likely that this may hurt the confidence of foreign investors which make up about 45 to 50% of transactions in the Nigerian Stock Exchange. If they decide to exit the market because of this then the market may just be primed for another long bearish run.

Devaluation

If this situation is not handled properly it may also trigger another massive devaluation. This could be caused by foreign investors who have had enough and will now use this decision by JPM as a reason to pull out their funds. Pulling out their funds creates demand pressure on forex and may result in a devaluation of some sort.

Only God can save us in this country.

To people that don't know what this means; it means we're no more categorised as "developing country" now we are downgraded to "underdeveloped country" so we'll be treated as such. Which means borrowing money, hosting international events etc would be a problem

I love my country sha so dont worry, buhari's body language would fix it

With this Buhari is failing seriously economically. I hope he has advisers that are counseling him on the significance of this.

This is very damaging to our economy at a time like this. God save us.

Óga ó!!....


It is well
Evn inside the well

These ripples should not come as a surprise considering the shaky and heavily dollarized economy inherited by this administration. It's quite significant that Emefiele's recent policies such as restrictions on forex transactions that facilitate money laundering, have been focused on protecting the Naira which lies at the heart of this issue.

The expulsion will be in October so it is anticipated that the new Minister of finance to be appointed within a couple of weeks, hits the ground running and institutes an appropriate fiscal policy to stem this tide.

Nothing I mean nothing can bring us down




I can remember the time of abacha with all the sanctions but still we survived




Who doesn't know about jp Morgan and chase from the 1900 there sole aim is to useless a nations economy and you end up in borrowing. Because of the new policies adopted they don't have access in ruining this country so now they want to give use a bad name.


Who cares, jp Morgan and chase are not the only financial organization in the world.


Sai buhari

[size=20pt]This is one of the reasons why I'm looking for Buhari's non-existent WASC Certificate. Would have loved to know what he had in Economics.......lol[/size]

citizenisb:
http://nairametrics.com/jp-morgan-index-list-of-possible-implications-when-nigeria-is-evetually-kicked-out/

Harsh times await this country as we have been kicked out of the Bond Index making it difficult to maintain government liquidity due to the capital controls by Emefiele and no Finance Minister to lay a solid fiscal policy. I fear about social unrest.

Pray for Nigeria.



http://mobile.reuters.com/article/idUSL5N11E3Y320150908

Since we have been there what did we benefit?

Abegi, all this people just want us to devalue our naira. They should just let us be
After all did we beg them to add us in the first place?

When we settle, they will readd us

IranuAbasha

the reality on ground shows the economy is collasping under this regime but some fools are virtually creating achievement for buhari to hold onto

hmm be ready for Armageddon. the change (worst) is yet to come.

what this govt is more interested in is media fight against corruption, while other sectors can nosedive and crumble, thank God the 100days of honeymoon is over, lets see what tinubu or apc would say again.

u begin to wonder why our certificates are not accepted in foreign countries, its obvious, we have very poor decision making, low judgement and absence of critical thinking. you can imagine where a graduate, msc holder, PhD holders even professors would say "even if buhari presents tissue paper as certificate I would vote for him. smh.

The Duara dullard is doing what he knows best which is actually doing nothing but yarn nonsense.

The gains of the last administration and by extension that since 1999 are quickly being eroded away.
[size=18pt]
Imagine the government of the day stating that the last economy evaluation by the past administration was a lie?

How can a govt deny the sieze of its economy for political gain? The economy continues to shrink and the only excuse that Aso rock can give is that the last administration lied about the sieze and health of the economy. Which sensible investor do the current crop of fools in Aso rock think will want to invest in Nigeria after such callous statement?[/size]

APC how market?

Look at all the campaign promises of Buhari/APC..... it has translated into final killing and burial of the Nigerian economy.

Even JP Morgan is confused that Nigeria has turned to Sudan economy. Just in three months of Buhari's tenure. If this can happen in three months, what will happen after 4years.

Lai Mohammed..... over to you, come and explain how Buhari's body language is doing magic to our economy.

First time in the history of human existence have a leader of a nation use body language to rule. No policy, No cabinet. Even the great and wise king Solomon will be envy of a leader that uses body language to rule, because, with all king solomon's wisdom, he couldn't use body language.

Investors have already lost trillions under this current administration so I am not surprise by this latest news. Propaganda and lies put this administration in office amd now we shall reap what the 95% have sowed. When we wailed about no Ministers running important offices the lying liars told the public that it is even better for us, now look at what has happened.

When I was calling Buhari and Tinubu economic hit men I was labeled a bigot.
95 percentars see your Sai Buhari now.....

We re finished. Recession loading

It would be a near tragedy if Nigeria is kicked out.

To hell with them...... Whether they like it or not, Nigeria must be better in this administration. They want to give wailers food this morning.

We don hear JP Morgan... But b4 PMB how 9ja be for 16years? Under PDP led govt? .... Make will try PMB govt too if he also fail change will also change him too until we get right person.....

Can any Nairaland contributor tell me what Buhari's economic policies are?


I can forgive illiterate Nigerians who voted for Buhari, but for educated Nigerians who jumped on a deceitful "change" bandwagon, and voted for a man who literally has no idea what governance is all about............ is very sad!


There is no policy direction whatsoever coming from the Daura Dul1ard, he's looking more and more confused with each passing day.


All the economic gains achieved under the administration of GEJ all virtually eroded over-night, by this vindictive fool for a President.

We're in for a hellish ride my people. Backtrack to international news when GEJ was in charge, nigeria became Africa's largest economy..the envy of many African country.

Someone once said it's the whites that keep blacks down. I've come to realize this is a great lie..only blacks keep other blacks down

This load is to heavy for Buhari naa

All Hail King Buhari

Seriously

liberty300:
To people that don't know what this means; it means we're no more categorised as "developing country" now we are downgraded to "underdeveloped country" so we'll be treated as such. Which means borrowing money, hosting international events etc would be a problem

I love my country sha so that worry, buhari's body language would fix it

When this current administration was confronted on the shrinking economy as can be clearly seen from the stock market declines which so far has wiped off 2.5 trillion since the Duara Dullard was sworn in, the only excuse Aso Rock and liar Mohammed could give was that the last economy evaluation by the last administration was a lie.


How do you expect any one to take you serious after such statement? This is exactly how the naira crashed after it was clear to anybody with a sensible brain that Sanusi was a pathological liar.

The APC is full of the most incredibly daft set of individuals and Buhari is obviously the best candidate to lead these set of fools.

who is jp Morgan?

Where there are no economic direction, the investors are scarred and the market indices noise dive.

It's high time Buhari addressed this economic failure.