Nigeria Inches Closer to Re-entry Into JP Morgan Bond Index, Marks Crucial Test of FX Reforms, Market Confidence

Nigeria is getting closer to the JP Morgan government obligations index, almost a decade after being abandoned, global investors have traced and forced billions of capital.

The renewed thrust, now supported by radical currency reforms under the Central Bank of Nigeria (CBN), is being executed by the authorities as a vital stage in the restoration of the country’s global financial credibility.

Patience Oniha, Director General of Debt Management Office (DMO), confirmed the development during a high -level commitment of investors on the sidelines of IMF / World Bank spring meetings in Washington, DC, where the Ministry of Nigeria of Finance and developments of portfolio lower than CBN on macroeconomic developments.

Oniha revealed that discussions with JP Morgan were “advanced” and tilted on the reforms of the foreign exchange market in Nigeria (FX).

“We believe that we are eligible now,” she said, highlighting the liberalization of the FX regime, which had previously triggered the expulsion of the Nigeria of the index in 2015. “The reforms addressed key challenges such as the illiquidity and the difficulties with which investors were confronted at the exit of the market. They were collision points.”

Nigeria’s potential start-up in the JP Morgan GBI-EM index would mark a major inflection point in its relationship with global investors. The index is widely followed by institutional fund managers with thousands of thousands of measures under management. Membership means not only the confidence of investors, but also guarantees access to a flow of passive capital entrances from funds following emerging markets.

According to analysts, inclusion could channel up to $ 2 billion in immediate foreign portfolio on the local Nigeria market, providing essential support for Naira and reducing pressure on external reserves. A main strategist of familiar investments with the talks said that such a decision would act as a global vote of confidence in the efforts of the Central Bank to restore the stability of the FX and rebuild credibility.

Nigeria was included for the first time in the JP Morgan government obligations index in 2012, following the development of a more liquid internal bond market and the introduction of reforms that allowed bidirectional FX prices and better access to investors. But three years later, the relationship was embittered. In January 2015, JP Morgan placed Nigeria on its index surveillance list, citing an increasing concern concerning the illiquidity of foreign exchange, opacity in the management of exchange rates and a macroeconomic framework of deterioration. This led to the elimination of the Nigeria of the index in September 2015 after having failed to solve these problems – including the inability of investors to repatriate funds due to FX rationing and capital controls.

This exit coincided with a crisis in the price of oil and marked the start of a long range of FX instability, two -digit inflation and a loss of confidence of investors that Nigeria is only reversing.

At the heart of the new Nigeria offer is the FX Reform Drive launched by the CBN since mid-2023. As part of the current administration, the central bank collapsed several exchange rates in a single and more thoughtful rate on the market, ended the special windows subject to arbitration and took measures to limit the fixing of artificial prices on the official market. These movements have reduced the gap between official and parallel market rates, improving liquidity thanks to interventions and attracted cautious optimism on the part of investors who have long complained about a non -transparent FX regime. But recovery is far from complete.

Familiar sources with the re -engagement process have told Nairametrics that JP Morgan remains cautious. One of the snack points is the depth and functionality of the local bond market of Nigeria, which must be more robust to meet the criteria of the index. A source noted that if there is progress, the market still has no depth and liquidity that foreign investors need.

“We are not yet on the finish line, but if the momentum continues, Nigeria could be back before the end of the year,” said the source.

As discussions are progressing, Nigeria is still haunted by its recent past. In 2022, JP Morgan downgraded its prospects on Nigerian sovereign debt, citing poor budgetary management despite the record prices of oil. The bank underlined the exhaustion of FX reserves, the rise in debt costs and the opaque subsidies which continued to reduce public finances. These concerns have not yet completely dissipated. Just earlier this month, JP Morgan advised customers to relax long positions in Nigeria’s OMO invoices in the midst of renewed pressure signs on the country’s oil depending on the country. He warned against the risk of decreasing budgetary stamps, the drop in oil revenues and the opposite winds in global trade which could expose the Nigeria financial system to new vulnerabilities.

Analysts believe that if Nigeria’s success in the JP Morgan index could have significant downstream effects. Among other things, it should reduce the country’s loan cost, as the inclusion of the index would result in the request for local bonds and compression yields. The influx of dollars in passive investment funds could reduce pressure on Naira, which has been faced with volatility and depreciation in recent years. The renewal of foreign interests could also improve the liquidity and efficiency of prices on the Nigeria bond market, which has aroused broader development in the capital market. A successful school year can also push other rating agencies, funds and financial institutions to re -engage with the Nigeria fixed income market.

However, despite the CBN reforms, the volatility of the frames and the inflation remain high. The inflation of the securities exceeded 33% in March 2025, eroding the real yields of fixed income instruments. Tax discipline is also under control, especially since the government is struggling to curb expenditure in the midst of pressures linked to subsidies and low tax revenue.

In the end, Nigeria’s push to join the JP Morgan index is as much a reputation for reputation effort as it is a strategic financial decision. Although a return to the index may mean that the worst is over, experts note that only the execution of coherent policies will convince the market that a real turnaround is underway.