JP Morgan: Nigeria can not plan with portfolio Investor's funds- Osinbajo

Vice President, Professor Yemi Osinbajo has described the JP Morgan index as an index for portfolio investors, whose money cannot be relied upon for economic planing.
According to him, for the fact that portfolio investors’ funds are usually short term and easily pulled out of a country at the slightest sign of risk, a country cannot rely on it for long term planning; adding that the federal government  is not unduly  worried about the delisting of Nigeria because a lot of that money had moved out already.
This is even as  Nigeria plans to re-issue its five- and 10-year bonds in the last quarter of the year to raise up to N270 billion  after JP Morgan’s index on Wednesday delisted half of the maturities belonging to the country.
It will be recalled that half of the Nigerian bonds listed on JP Morgan’s emerging markets bond index (GBI-EM) was removed on Wednesday and the rest to be removed next month. JP Morgan had earlier warned that it would completely drop Nigeria from its index, citing a lack of liquidity and currency restrictions.
In a television program monitored in Lagos, Osinbajo said the removal from JP Morgan index is only for a year. So if the country is anxious to get back on the index, it has a whole year to prepare and get back.
“But it is important to bear in mind that a country does not necessarily change its policies, so as to satisfy portfolio investors. Especially when your policies are to address systemic issues,” the Vice President stated.

He explained further that because of sharp drop in oil prices, the Nigerian economy experienced a shock which it has to deal with and the Central Bank’s way of dealing with it is to introduce exchange controls.

He said Nigeria have tough choices on whether to open up the exchange regime as it used to be or continue with the control measures despite depleting revenues and foreign exchange reserves.
“I think the Central Bank of Nigeria (CBN), made the right choice by saying; ‘let us take our time on this issue. We need a short term exchange controls even at the risk of being delisted from JP Morgan index.’ Those exchange controls have being reasonably successful. Our foreign exchange reserves have stabilized and our current account deficit has narrowed, which is good in the short term,” he observed.

According to the Vice President, the Federal Government is in regular consultation with the CBN to know what the longterm solution would be, “because you can’t have exchange controls as a long term measure.”
Meanwhile, the 10-year bond, among those to be delisted on the influential index, edged higher to yield 15.09 percent after the Debt Management Office (DMO) on Wednesday released its calendar showing it will re-introduce the benchmark paper, which was not issued in the third quarter.

The DMO said it will sell between N60 billion  and N90 billion  each in five- and 10-year bonds in each of the remaining three months of the year as reopenings of outstanding maturities.
Traders said bond yields were flat  on Wednesday as foreign buyers had cut their exposure to 0.69 percent ahead of the index expulsion.

The 2024 bond to be issued from October will pay a coupon of 14.20 percent while the 2020 paper will pay 15.54 percent.

The central bank on Wednesday said the banking system had enough liquidity to take up what foreign investors might sell after JP Morgan removed Nigeria from its bond index.

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