The Nigerian bond market is set to record increased activities and patronage, especially in the next few months, analysts have said.

This, according to them, would stem from plans by the United States financial institution, JP Morgan, to add Nigerian domestic bonds to its Government Bond Emerging Market Index.

A statement by the institution disclosed plans that Nigeria is to be included in the JP Morgan Emerging Markets Government Bond Index, in a phased manner, by the fourth quarter of 2012.

This, according to the statement, is expected to lead to an increase in portfolio flows of up to $1bn or N160bn into FGN Bonds and a positive impact on the naira.

The JPMorgan GBI-EM indices offer investors exposure to emerging market debt and tracks local currency bonds issued by emerging arket governments.

“The inclusion would be phased over three months, according to the note that was sent to clients. The GBI-EM Index series may include government debt maturing in 2014, 2019 and 2022 as they are the country’s most liquid bonds,” the statement released last week had noted.

Analysts have said that this move would boost Nigeria’s bond market within the next few months, as more foreign investors would likely be drawn into the market.

For instance, analysts from Vetiva Capital Markets, in their report, noted that the move was sure to attract further investments into the bond market, thus deepening the market as well as attracting more income to the sector.

The report said, “JPMorgan Chase & Company is set to add Nigeria to its Government Bond – Emerging Index in three phases, beginning in October up until December, this means that Nigeria will possess a weight of roughly 0.59 per cent in the Index, which has about $170bn of assets under management.

“In our view, the inclusion of these bond instruments will raise the profile of the Nigerian Bond Market on the international scene and attract steady portfolio inflows from investors and asset managers.”

This, according to them, is a plus for the country which has been seeking inclusion into emerging-market indexes to increase portfolio flows into the nation’s capital markets.

Another analyst, an emerging markets strategist, Mr. Samir Gadio, said, “The consensus in the market is that Nigerian bonds will have a weight of around 0.59 per cent in the GBI-EM index. This is not much in proportional terms, but may imply that at least $1bn will come into FGN bonds.”

Currently, the total FGN Bond market capitalisation is put at N3.7tn ($23.99bn), according to data from investment firm Dunn Loren Merrifield, with liquidity being fed by a relatively developed banking system and a nascent and fast growing pension fund industry.

Source: Punch