• Wednesday, May 29, 2024
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Nigeria escapes MSCI exclusion, saved by I&E window


Morgan Stanley Capital International (MSCI) has said Nigerian stocks will remain part of its frontier index and are no longer under review for a possible demotion to a standalone status, following the improved foreign exchange liquidity triggered by newly introduced Investors and Exporters window.

In a move that led to massive capital outflows (with the Nigerian stock market capitalisation declining some 17.14 percent), MSCI had announced in June 2016 that it was considering Nigeria for a possible downgrade to stand-alone status, highlighting deteriorating FX liquidity as well as FX restrictions as key concerns.

“Unequivocally, the MSCI’s decision to retain Nigeria in the Frontier index reflects the success and effectiveness of the IE window,” said analysts at Lagos-based investment bank, Cardinal Stone Partners.

The naira gained 0.17 percent to N359 per US dollar Friday at the said I&E window, according to data provided by trading platform, FMDQ.

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Until now, the decision whether or not to retain Nigeria in its Frontier Market Index has been a recurring theme among local and foreign institutional investors.

The Central Bank of Nigeria (CBN) in April, 2017 established the Investors and Exporters (IE) window that allowed for FX transactions at market determined rates in a bid to ease the concerns of foreign investors. The window has handled over $15 billion since inception, according to data compiled by BusinessDay.

Following the creation of the I&E window, the MSCI decision on whether to retain Nigeria in its Frontier market indexes in June, 2017, was postponed to ascertain the effectiveness of the IE window.