By Tosin Sulaiman
JOHANNESBURG Oct 1 (Reuters) – Nigeria joined a key JP
Morgan local currency government bond index on Monday, becoming
the second African country after South Africa to be included in
a widely followed index thanks to its improving liquidity
levels.
The west African country’s entry into the JP Morgan
Government Bond Index-Emerging Markets (GBI-EM) from Oct. 1
could translate into at least $1.5 billion of inflows to the
bond market, the bank estimates.
It will raise the profile of Africa’s most liquid debt
market after South Africa and is expected to lead to greater
foreign participation, given that Nigerian yields offer a
significant premium to established sovereign lenders.
“It’s now seen as a market that can’t be ignored
internationally and one of the frontier markets where you need
to have a position,” said Samir Gadio, emerging markets
strategist at Standard Bank.
The entry of Africa’s top crude oil producer into the GBI-EM
comes as South Africa joins Citigroup’s World Government Bond
Index, although funds tracking the latter are estimated at $2
trillion compared with $180 billion for the JP Morgan index.
At around $25 billion, Nigeria’s sovereign debt market is
still dwarfed by South Africa’s $100 billion. Secondary market
turnover is also around a fifth of its more developed peer.
However, analysts said Nigeria’s addition to the GBI-EM
marks it out as one of the more accessible markets on the
continent for foreign investors.
“Nigeria has done a lot of work in recent years in
developing its bond market to improve liquidity,” said Leon
Myburgh, sub-Saharan Africa strategist at Citi.
Continued…
