Nigeria has been downgraded from a frontier market to an unclassified market a year after an annual review of countries’ stock rankings by FTSE Russell, a subsidiary of the London Stock Exchange Group, placed Africa’s largest economy on its watch list of countries monitored for possible reclassification.
The downgrade takes effect from September 18, when Nigerian index components will be removed at zero value from the FTSE Frontier index series, including the FTSE Frontier 50 index, the FTSE IdealRatings Islamic index series, the FTSE/JSE All Africa and the FTSE Middle East & Africa Extended. Index series and FTSE/MV exchange rate.
FTSE Russell stock indices They are used by investors around the world as stock benchmarks, allowing them to track the performance of specific market segments.
The decision followed a ratification by the Board of Governors of the FTSE Russell Index and was made after there was no improvement in the ability of international institutional investors to repatriate capital at an exchange rate that would be used in the FTSE Russell stock indices, according to a statement.
“FTSE Russell has received feedback from market participants that while Nigeria has adopted a floating exchange rate (FX) for the Nigerian naira in the Investors and Exporters (I&E) FX window, it now operates on a system of “willing buyer, willing buyer, Seller”, the lack of liquidity in the I&E FX window continues to negatively impact the ability of international institutions to replicate reference changes,” the document says.
However, Nigeria will remain in the FTSE ASEA Pan Africa Index Series even though the holding of some corporate events has been suspended until further notice.
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“FTSE Russell will continue to monitor Nigeria and once foreign currency delays are cleared for a period of time, Nigeria will be assessed as a new market in accordance with the FTSE Stock Country Classification Process,” the statement added.
Nigeria must spend a period of time on the watch list before being readmitted as an eligible market for the FTSE Russell stock indices.
Nigeria was added to the Border Watch List from September 2022 for possible reclassification from border market status to unclassified after reports from index users and market participants from 2020 showed high demand for dollars dissatisfied by investors who wanted to repatriate capital from Nigeria.
The surplus is currently estimated at about $10 billion.