Nigeria to lose Frontier Market Status on Dollar Shortage

Nigeria is poised to lose its frontier market status because of persistent foreign-exchange shortages in Africa’s largest economy, reports Bloomberg.

MSCI Inc. is considering downgrading the MSCI Nigeria indexes to standalone markets status from frontier market, the New York-based company said in a statement.

“There has been a continual and severe deterioration in the ability to repatriate funds from Nigeria,” Craig Feldman, global head of Index Management Research, said in the statement.

“Given the prolonged nature of the issues affecting the market’s accessibility, we have put forth the consultation to reclassify the MSCI Nigeria Indexes.”

The loss of frontier market status could cast doubts on perhaps the only bright spot in Nigeria’s flagging economy and stir more despair for investors.

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Africa’s biggest crude producer has been rationing dollars because of lower oil income that accounts for about 90% of foreign exchange earnings.

The nation’s foreign-exchange reserves have dropped 4% this year to $38.8 billion, despite the government tapping overseas bond market twice.

Nigeria’s central bank has devalued the currency three times in the last two years and has a backlog of unmet dollar demand from investors, according to the International Monetary Fund.

Nigeria’s NGX All Share Index has gained 21% this year in local currency terms.