Nigeria financial markets suffer after JP Morgan expulsion

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Dealers at the Nigeria Stock Exchange
Nigeria’s stocks sunk on Wednesday after JP Morgan said it would eject Africa’s biggest economy from its influential emerging markets bond index due to tough controls imposed to prevent a currency collapse.
In a move that came earlier in the year than expected, JP Morgan said late on Tuesday it would remove the bond listings belonging to the West African nation by the end of October, forcing fund managers to sell Nigerian bonds, which might raise the country’s borrowing costs.
The decision is a blow to President Muhammadu Buhari, who has promised to diversify an oil-dependent economy hit by a slump in global crude prices but who faces criticism for not having appointed a cabinet since his inauguration on May 29.
With no finance minister in place, foreign investors have been left wondering about government policies and struggling to sell shares or bonds as the central bank adopted tough currency restrictions to halt a slide of the naira.
Anders Faergemann, senior sovereign portfolio manager at PineBridge Investments, said he was surprised that Buhari had not started tackling the country’s economic problems more than three months into his tenure.
“As an investor it is flabbergasting that the Nigerian authorities have allowed themselves to be put in this situation,” he said.
All Nigerian stocks listed in the MSCI frontier market index fell by more than 3 percent, while bond yields spiked across maturities.
While many foreign bonds investors have exited the market since JP Morgan warned Nigeria in January and again in June that it would get kicked out of the index unless conditions improved, stocks investors were now also pondering whether to stay.
The US bank had placed Nigeria on its index watch but a decision had not been expected until later this year.
“You can only imagine the chaos that is unfolding here,” a …Read More

Source:: PM Newspaper