Naira eases 0.2% as JPMorgan readmits Nigeria to emerging bond index

The naira weakened by N2.85 to N1,329.15 per dollar on Tuesday, a 0.2 percent loss against the N1,326.30 quoted on Monday at the Nigerian Foreign Exchange Market (NFEM), Central Bank of Nigeria data showed.

The move came as J.P. Morgan returned Nigerian local-currency bonds to its tracking indexes after an 11-year absence, assigning them a 7.4 percent allocation in the newly launched Government Bond Index-Emerging Markets (GBI-EM) Edge.

Dollar turnover jumps 174%

Dollar liquidity improved. Total turnover at the interbank segment of the FX market surged by 174.16 percent to $262.12 million on Tuesday, from $95.61 million on Monday. The number of deals also rose 57.79 percent, from 109 on Monday to 172 on Tuesday.

NFEM figures for Tuesday's deals and turnover were not available at the time of reporting. At that window, the number of deals rose 3.4 percent to 301 on Monday, from 291 on Friday. Total turnover declined 7.63 percent to $423.95 million on Monday, from $458.99 million on Friday.

Nigeria's external reserves rose 30.52 percent to $54.61 billion as of September 14, 2026, an 18-year high, compared with $41.84 billion in the same period of 2025.

Index return and FTSE upgrade

Ayokunle Olubunmi, head of Financial Institutions Ratings at Agusto & Co., said the inclusion will decrease demand for Nigeria's debt instrument which will drive down the associated yields. "Ultimately, it will reduce funding cost as the yield is used as the basis for determining the borrowing rate," he said.

The inclusion is expected to improve the visibility of Nigeria's domestic debt market among global investors and could support increased foreign portfolio flows into the local-currency bond market.

FTSE Russell confirmed in a market notice published on Thursday, August 27, 2026, that Nigeria's reclassification from Unclassified to Frontier Market status will proceed from the open of trading on September 21, 2026. Nigeria was removed from the index in 2023 amid concerns over foreign exchange liquidity, capital repatriation and market accessibility.

Analysts at Coronation Merchant Bank said the naira is expected to remain broadly stable in the near term, largely supported by continued improvements in external reserves, while the FTSE Russell inclusion should provide gradual support in the medium to long term. The bank's report showed the official rate depreciated 0.40 percent week-on-week to N1,326.52 per dollar, from N1,321.22. The weakest single-day print came on Wednesday, September 9, 2026, when the official rate touched N1,329.21.

The parallel-market rate strengthened 0.36 percent week-on-week to N1,385.00 per dollar, from N1,390.00. The parallel-market premium moderated to N58.48 per dollar, from N68.78, narrowing the spread between both windows although a significant gap persists.

Bond market waits for inflows

Victor Ogunfijo, head of fixed-income trading at CardinalStone, said foreign money has not shown up yet. "We have not yet seen inflows coming into the local bond market since the announcement of it yet," he said, adding that "the J.P. Morgan effect might be lagged." Omobola Adu, a fixed-income analyst, also said it was too early to assess the immediate impact, noting offshore fund managers were unlikely to reposition immediately around a new index.

The Debt Management Office offered N1 trillion across a new 16.80 percent FGN September 2036 bond and a reopening of the 15.45 percent FGN June 2038 bond on Monday. The auction attracted N1.49 trillion in subscriptions. The 2036 issue received N546.90 billion in bids against N400 billion offered, while the 2038 bond received N947.83 billion against N600 billion. The securities were allotted at marginal rates of 16.79 percent and 16.85 percent.

The auction took place on the same day as J.P. Morgan's announcement, making it difficult to link the result to the index inclusion. At around 16.7 percent, Nigerian government bond yields offer a substantial nominal return premium, but foreign investors must also weigh naira risk and the pull of dollar-denominated assets as US yields rise.