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Dr. Ben Obi, an Economist and lecturer at the University of Abuja, has accused President Muhammadu Buhari’s slow pace of leadership as being responsible for banking giant J.P Morgan delisting Nigeria from its Government Bond Index-Emerging Markets, GBI-EM.
J.P Morgan an American multinational banking and financial services holding company on Tuesday said it would remove Nigeria from its Government Bond Index-Emerging Markets, GBI-EM, after the country ignored the bank’s earlier warnings of restoring liquidity to the foreign exchange market.
According to Dr. Obi, Buhari’s sluggish stance in tackling the headwinds facing Nigeria may further compound the country’s problems. “I think it’s clear for all to see, the CPI is on the rise, revenue is still shaky and very recently we saw poor GDP and job creation numbers in the second quarter of the year,” he said.
“When you take all these and add trade shocks and global headwinds to it, we should be taking urgent steps to curb the economy’s slump.
“The GDP numbers particularly are a ten year low and it is unlikely that much will change for the third or even the fourth quarter, if the nation continues at such a pace.” Sola Oguntade a Research Analyst on the other hand said Buhari sole administrator persona, has squandered the international goodwill of Nigeria as it concerns foreign investors.
“Look at the unstable parts of Africa, or even loan defaulting Greece, investors will still go there, because to a large extent, they can predict the direction of the economy and easily price their risk. “In Nigeria, we are facing challenges on multiple fronts, crude oil/revenue challenges, while there is still that foreign exchange dark cloud hanging over the CBN.
“So, in my opinion, the President needs to place his cards on the table (as it concerns economic management), so that investors can take a position.
“Global investors will invest in any economy they understand,” he said. Financial analysts have expressed fears that the decision could result to massive capital flight. JP Morgan Government Bond Index-Emerging Markets GBI-EM indices are broad emerging market debt benchmarks, that track local currency bonds issued by Emerging Market Governments.
Due to a series of administrative measures which according to the bank, hampered the ability of foreign investors to reproduce Nigeria’s weight in the GBI-EM suite of indices, in January 2015, Nigeria was placed on Index Watch.
According to J.P Morgan, foreign investors who track the GBI-EM series continue to face challenges and indecision while transacting in the naira due to the lack of a fully functional two-way FX market and limited transparency. A series of administrative measures by the Central Bank of Nigeria impeded the ability of foreign investors to access the Foreign exchange market.
“As a result, Nigeria will be removed from each of the six GBI-EM indices starting September 30th.
“The weight change will be implemented linearly over a two-month period with half of the adjustment applied on September 30th, 2015, and the remaining on October 30th, 2015, J.P Morgan said. The bank warned that if the removal process is completed, Nigeria will not be eligible for re-inclusion into the GBI-EM indices for a minimum of 12 months.
“Nigeria’s index eligibility after this period is contingent upon a consistent track record of satisfying the index inclusion criteria,” stated J.P Morgan. Nigeria’s economy during former President Goodluck Jonathan’s administration in 2013, was listed among the 18 emerging market economies who were part of the GBI-EM Broad index, such as Brazil, Chile, China, Colombia, Hungary, India, Indonesia, Malaysia, Mexico, Peru, Philippines, Poland, Romania, Russia, South Africa, Thailand, and Turkey.
However, according to experts, the economy since the emergence of Buhari’s administration, has been battered in recent months, showing that it is not immune to global headwinds, signaling an imminent relapse into a recession
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