With a return to the FTSE index secured, Nigerian authorities will now turn their attention to persuading MSCI and JPMorgan to restore the country to their global equity and bond benchmarks, in a bid to unlock a potentially larger channel for foreign capital.
‘We are now moving towards getting reincluded on the MSCI and JP Morgan index,’ Emomotimi Agama, director-general of the Securities Exchange Commission (SEC) told BusinessDay. ‘All of the progress we are making is a reflection of the growth of the market,’ Agama said.
MSCI currently treats Nigeria as a Standalone Market, a status it imposed in 2024 after concluding that persistent foreign-exchange liquidity problems were preventing international investors from reliably moving money into and out of Nigerian equities. MSCI said at the time that the accessibility of the market did not meet the standards expected of a Frontier Market.
JPMorgan, also acting on currency controls in the country, pulled Nigeria off its Government Bond Index for Emerging Markets (GBI-EM) in 2015, after only just three years of being included.
‘With the right policy mix, Nigeria could return,’ Charlie Robertson, an Emerging Markets strategist, said.
‘Back in 2012 just being included in one of those bond indexes was expected to result in $1 billion of inflows. As recently as 2015, Nigeria was over 10% of the Frontier equity index, and the head of the stock exchange at the time hoped to grow the stock market so much that it might be considered for emerging market inclusion,’ Robertson said.
‘As a stand-alone country, Nigeria became an off-index bet which most investors ignored after being scarred by being locked inside the market in 2015-17 and again in 2020-23,’ Robertson said.
The scars run deep. Nigeria’s exclusion from major benchmarks followed repeated episodes in which foreign investors struggled to obtain dollars and repatriate proceeds. MSCI’s own assessments have repeatedly identified foreign-exchange liquidity and capital repatriation as central obstacles to market accessibility.
The foreign exchange shortages that characterised the market have now faded. Reforms implemented by the Central Bank have improved dollar liquidity and restored investor confidence.
External reserves climbed to $54 billion last week, the central bank said, the highest level in 18 years and the clearest signal yet that investors are regaining confidence in Africa’s most populous country.
The buildup follows a 2023 overhaul that unified the naira’s exchange rate and dismantled a multi-tiered currency regime long blamed for scaring off foreign capital. By letting the market, rather than the central bank, set the naira’s value, policymakers have drawn dollar inflows back into the country.
FTSE’s decision to restore Nigeria to frontier market status is the l atestmajor recognition of the country’s improved market accessibility after years of foreign-exchange restrictions and difficulties repatriating funds.
The index provider said Nigeria now meets the five quality-of-markets criteria required for Frontier Market status. It specifically pointed to reports that FX queues have been cleared and that international institutional investors are no longer experiencing material delays in repatriating capital.
That is important because the real prize is not the index classification itself. It is the money that can follow.
Index inclusion gives asset managers a benchmark against which Nigerian equities can be measured and, for some funds, creates a requirement to hold the market. It can also make Nigeria easier to analyse and trade as part of a broader emerging and frontier-market allocation.