JP Morgan, the global leader in financial services, has removed Nigeria from its emerging market sovereign list due to the Nigeria National Petroleum Corporation’s (NNPC) inability to transmit three months’ worth of oil earnings to the Federal Government.
The American Bank’s emerging market sovereign advised investors to be “overweight” on Nigeria, citing fiscal problems and adding that the country failed to capitalise on high oil prices.
NNPC’s failure to transmit earned money from January to March due to gasoline subsidies and insufficient oil output led to JPMorgan’s delisting from the market.
JP Morgan said it had removed Nigeria’s debt from its “overweight” category. Analysts have also warned that the measure could make it more difficult for Nigerian enterprises to repay their dollar-denominated debts as the currency shortage continues, and it could also lead to further depreciation of the naira.
JPMorgan, on the other hand, replaced Nigeria with Serbia and Uzbekistan in the “overweight” category. As reported by Reuters, JPMorgan includes Serbia in the group because of the country’s large foreign exchange reserves and fiscally conservative administration. Uzbekistan was included in the group because of its relatively low debt despite its exposure to Russia.
Aside from that, the bank analysts stated that since the middle of April, the Emerging Markets Bond Index Global Diversified (EMBIGD) index had declined 16%, “with most of the losses coming from interest rates,” and that $4 billion in net outflows from emerging markets had occurred.
They pointed out that a rise in riskier sovereign yields to 10.6% is restricting market access and raising debt default risk because of the coronavirus outbreak.