Barclays’ plan to delist Nigerian bond worries operators

Operators in the nation’s capital market have lamented the plan by Barclays Bank to delist the Federal Government’s bond from its index, attributing the development to volatile foreign exchange and macro-economic concerns in the country.

The operators were worried over the recent reports that Barclays Bank will consult with its index users on whether Nigeria’s sovereign debt should remain in its emerging market local currency government bond benchmark.

The index provider had said it would drop Nigeria from its index, citing same lack of liquidity and currency restrictions and coming on the heels of the pronouncement by JP Morgan to delist Nigerian bond from its index.

Already, Barclays has listed Nigeria’s eligibility for inclusion in the Emerging Market Local Currency Government Index among the primary topics to be considered in its yearly review process, according to a statement, though without additional details.

However, the operators have urged the government to take more proactive fiscal measures to restore confidence in the nation’s economy, stressing the need for it to work out modalities that would help to forestall further occurrence.

Specifically, a stockbroker with Meristem Securities, Baba Ibrahim, said:
“I think we should go back to drawing board. All these issues we are talking about have to do with discussion.  We need to work out short to medium term framework within which we think we all can get down those hurdles and there will be a win-win situation for every body.

“We are actually connected to the global market and you must have a window through which your bond is gauged.  If you don’t do that, how do we pass on information to foreign investors who are actually interested in our bonds? It is important we have subscribed to the index- JPMorgan and Barclays.

“What has happened is that in the past four to six months, we have not had economic team that would intercede and get this bond issue well trashed out but soon, we would see some levels of discussions playing underground.

“Nigerian economy is too robust. We still have foreign reserve that covers as much as four months import. With the new directive, we need to step down importation and conserve more foreign exchange. There is nothing to worry about. We need to sit down and have discussions with them to see areas we can reach a common grounds and move on with it,” he said.

Ibrahim, who described the plans as “not unexpected”, given that most of these rating agencies have their parameters, added that there was need to adhere strictly to these parameters, as non compliance attracts various sanctions.

The Managing Director/CEO of Highcap Securities Limited, David Adonri, said it was not unexpected that Barclays wants to remove Nigeria from its index.

“It is an international bank that uses international rules and parameters to analyse. It is not unusual that they will arrive at a similar conclusion. So, the effect may not materially change the situation now if they are doing the same thing JPMorgan did, which the market has already reacted to.

“It is because the fiscal authorities is still asleep, that is why investors are still habouring negative sentiments to the market and economy. When the authorities wake up from their slumber, and start taking appropriate fiscal measures, coupled with what the monetary authority has done, confidence will be reassured in the economy and market and we may have more demand for financial instrument going forward,” he said.

Another stockbroker, Samuel Olayemi, said: “The issue has been over-flogged. We have been trading in this country in the past years without JPMorgan.  Their existence has not made any difference as far as I am concerned.

“They will bring their clients and they will come and maneuver price movement and at the end of the day, when they want, they dispose of everything and go away. Unfortunately the system in the country does not make them to pay tax on capital appreciation.

“So if they want to delist us from the index, let them go ahead and do it. The market will still stabilise and when it does, we can move forward. Their coming has brought about some disruptions in the market and it is good they go,” he said.