JP Morgan: Nigeria won’t succumb to blackmail, says Osinbajo

In from Smart Ali …

Vice President Professor Yemi Osinbajo has maintained that the country cannot change its foreign exchange rules to satisfy portfolio investors.

The VP assured that the government was resolute in its support for the Central Bank of Nigeria (CBN’s) currency controls policy.

Osinbajo spoke in an interview with a church organisation, broadcast on Channels TV and monitored by Bloomberg.

Speaking against the background of the decision from JPMorgan Chase & Co. to remove the nation’s bonds from its emerging-market bond indexes, Osinbajo said the government wasn’t “unduly worried” by JP Morgan’s decision.

Nigeria’s inclusion in the indexes in 2012 had attracted “hot money” into the economy, which has now reversed, he said.

The naira’s plunge to a record low in February following a slump in oil prices prompted CBN Governor Godwin Emefiele to extend restrictions on trading and introduce bans on purchases of dollars by certain importers.

While the controls have helped to stabilise the currency of Africa’s largest oil producer, it’s put Emefiele at odds with investors and even fellow central bankers, who say the naira is overvalued.

“We need short-term foreign exchange controls even at the risk of delisting at JPMorgan,” Osinbajo said.

The restrictions, he maintained: “have really been successful. They’ve led to a situation where our foreign exchange reserves have stabilised and our current-account deficit has narrowed, which is good in the short term, but it can only be short term.”

Half the Nigerian bonds listed on JP Morgan’s emerging markets bond index (GBI-EM) was removed on Wednesday from the index.

The decision, which means investment funds tracking the index will sell Nigerian bonds, adds to upward pressure on national borrowing costs from a sharp drop in oil revenues.

JP Morgan said last month it would drop Africa’s largest economy from its index, citing a lack of liquidity and currency restrictions.

In 2012, Nigeria became the second African country after South Africa to be listed in the index with a weight of 1.8 per cent. The estimated yield for Nigeria bonds on the index was quoted at 14.83 percent as of Sept. 25, marking the second highest yield after Brazil at 15.75 per cent, the bank said.

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