The Nigerian bond market is set to be on the upbeat as JP Morgan has concluded plans to include the Federal Government of Nigeria (FGN) bonds in its emerging markets government bond index from the fourth quarter of 2012.

In its Nigeria Bond Market watch released on Monday, analysts at the Dunn Loren Merrifield (DLM) said potentially, this was expected to bring $1 billion into the Nigerian bond market, stating that it would boost the nation’s economy.

According to the analysts, Nigeria had met the necessary requirements, stressing that the Central Bank of Nigeria’s (CBN’s) lifting of restrictions on foreign investors’ participation in the bond market in July 2011 could have helped to facilitate the inclusion in the government bonds in the index.

“We understand that Nigeria meets the minimum requirements to qualifying for the index which includes, but not limited to, being classified as a low and upper-middle income country by the World Bank for at least two successive years, the availability of two-way daily pricing on the bonds and a sufficiently liquid bond market, among others,” the analysts stated.

They pointed out that secondary market activities for FGN bonds were influenced by the FGN bond monthly auction and the announcement of JP Morgan’s intention to include Nigerian FGN bonds in its emerging markets government bond index during the period under review.

DLM disclosed that during the monthly FGN bonds auction, N25 billion worth of each of the three bonds on offer were sold, that is, the 15.10 April 27, 2017; 16.00, June 29, 2019 and 16.39, January 27, 2022, at marginal rates of 16.33 per cent, 16.14 per cent and 15.90 per cent respectively, against 16.20 per cent, 16.59 per cent and 16.30 per cent respectively during the previous auction, adding that all the securities were reopened and subscription levels for the instruments stood at 176.00 per cent, 283.88 per cent and 536.12 per cent respectively, while total subscriptions stood at N249.11billion against N121.60 billion at the July auction.

“We note the relatively high subscription level on the 16.39 January 27, 2022, which could be attributed to investors’ search for yields, hence taking advantage of the high coupon of the bond. The range of bids for the auction was 14.98 per cent-18.25 per cent against 15.00 per cent-18.00 per cent during the last one. However, we observed that the subscription level recorded by the 16.39 January 27, 2022 resulted in its low marginal rate when compared to other reopened bonds, considering its term to maturity (TTM) of 9.45 years,” the analysts added.

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