FTSE Russell Adds Nigeria to Watch List for Frontier Market Reclassification Amid FX Reforms

Nigeria’s path back to the global investment spotlight brightened this week as FTSE Russell announced it has added the country to its Watch List for a possible upgrade from “Unclassified” to “Frontier Market” status. The decision, published in the index provider’s 2025 Annual Equity Country Classification Review, reflects growing confidence in Nigeria’s financial reforms and the Central Bank’s efforts to clear foreign exchange (FX) backlogs that have long deterred international investors.

This marks a potential turning point after Nigeria’s 2023 removal from all FTSE global indices due to severe dollar shortages and repatriation delays. Back then, foreign investors struggled to access forex to withdraw their funds, leading to market illiquidity and a steep decline in portfolio inflows. FTSE Russell’s latest move acknowledges that those bottlenecks have largely been resolved since early 2025, with improved FX liquidity and more predictable access to foreign currency under the current reforms.

In a statement, FTSE Russell said the Watch List designation allows for “in-depth engagement” with Nigerian authorities and market participants before a formal reclassification is considered. The group emphasized that reinstatement into the Frontier Market Index is not automatic but depends on sustained stability in the FX market, consistent repatriation timelines, and investor confirmation that recent improvements are durable. Analysts say a successful reclassification could trigger a surge in passive inflows worth hundreds of millions of dollars, as global funds tracking FTSE indices regain exposure to Nigerian equities.

However, FTSE’s accompanying Quality of Markets Review revealed a mixed picture of Nigeria’s capital market health. While regulators such as the Securities and Exchange Commission (SEC) and the Nigerian Exchange Limited (NGX) were commended for transparency and oversight, weaknesses persist in FX access, transaction costs, and market depth. The FX market was rated “Not Met” due to limited dollar supply and wide spreads, while short-selling and derivatives trading remain underdeveloped. Still, the Central Securities Clearing System (CSCS) earned praise for reliable settlement systems and competitive custodianship.

Market experts view Nigeria’s Watch List inclusion as a critical step toward restoring investor confidence and reversing the outflows caused by its 2023 downgrade. A return to the Frontier Index would place Nigeria back on the radar of global institutional investors seeking emerging opportunities. FTSE Russell said it will continue consultations with Nigerian authorities and foreign investors ahead of its next classification review, which will determine whether the country formally regains its Frontier Market status.

source: Nairametrics