FTSE Russell, a subsidiary of London Stock Exchange Group, has downgraded Nigeria from a frontier market to an unclassified market.
It added that Nigeria was added to the Watch List from September 2022 for possible reclassification from Frontier to Unclassified market status.
It explained that this was due to reports received from index users and market participants from 2020 onwards of significant, ongoing delays to the repatriation of capital from Nigeria.
FTSE Russell said it has received feedback from market participants that although Nigeria has adopted a floating foreign exchange (FX) rate for the Nigerian Naira in the Investors’ & Exporters’ (I&E) FX Window, which is now operating on a “Willing Buyer, Willing Seller” basis, but lack of liquidity in the I&E FX Window continues to adversely impact the ability of international institutional to replicate benchmark changes.
It said: “Consequently, as index changes for Nigeria within FTSE Russell equity indices have been suspended since September 2022 and with no improvement in the ability of international institutional investors to repatriate capital at a foreign exchange rate that would be used in FTSE Russell equity indices, following ratification by the FTSE Russell Index Governance Board, FTSE Russell announces that the FTSE Equity Country Classification status of Nigeria will be downgraded from Frontier to Unclassified market status, with Nigerian index constituents deleted at zero value (0.0001 NGN) from the following FTSE Russell equity indices, effective from the open on Monday 18 September 2023:
“Nigeria will be retained in the FTSE ASEA Pan Africa Index Series, with the implementation of certain corporate events suspended until further notice.”
It added that FTSE Russell would continue monitoring Nigeria and once the foreign currency delays are cleared for a period of time, Nigeria will be assessed as a new market in accordance with the FTSE Equity Country Classification Process.
It noted that this process would follow the standard FTSE Equity Country Classification procedure and timetable for a new market, with Nigeria required to spend a period of time on the Watch List before it is readmitted as an eligible market for the FTSE Russell equity indices.
It said with the support of the FTSE Equity Country Classification Advisory Committee, FTSE Russell has conveyed its concerns to the Nigerian market authorities regarding the delays to the repatriation of capital and the execution of foreign exchange (FX) transactions.
It noted that despite open and constructive engagement with the key capital markets institutions in Nigeria, the geopolitical and macroeconomic factors affecting the market are such that international institutional investors have yet to report any improvement to the queues to repatriate capital from Nigeria, with delays now exceeding 18 months.
“Consequently, FTSE Russell has downgraded the ‘No objection to or significant restrictions or penalties applied to the investment capital or the repatriation of capital and income’ criterion for Nigeria from a rating of ‘Restricted’ to ‘Not Met,’ effective from March 2023,”” it said.