Nigeria has been demoted from a frontier market to an unclassified market one year after an annual equity country classification review by FTSE Russell, a subsidiary of London Stock Exchange Group, placed Africa’s largest economy on its watch list of countries monitored for possible reclassification.

The downgrade takes effect from 18 September when Nigerian index constituents will be deleted at zero value from FTSE Frontier Index Series, including the FTSE Frontier 50 Index, FTSE IdealRatings Islamic Index Series, FTSE/JSE All Africa Index Series, FTSE Middle East & Africa Extended Index Series and FTSE/MV Exchange Index.

FTSE Russell equity indices are used by investors across the world as equity benchmarks, allowing them to track the performance of specific market segments.

The decision followed a ratification by the FTSE Russell Index Governance Board and was arrived at after no improvement was recorded in the ability of international institutional investors to repatriate capital at a foreign exchange rate that would be used in FTSE Russell equity indices, a statement said.

“FTSE Russell 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, the lack of liquidity in the I&E FX Window continues to adversely impact the ability of international institutional to replicate benchmark changes,” the document said.

However, Nigeria will be retained in the FTSE ASEA Pan Africa Index Series even though the execution of some corporate events has been suspended until further notice.

“FTSE Russell will 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,” the statement added.

Nigeria is required to spend a period of time on the watch list before it is re-admitted as an eligible market for the FTSE Russell equity indices.

Nigeria was added to the Frontier Watch List from September 2022 for possible reclassification from frontier to unclassified market status after reports from index users and market participants from 2020 onwards showed heaps of unmet dollar demand from investors wanting to repatriate capital from Nigeria.

The overhang is currently estimated at around $10 billion.

PT