MSCI to reclassify Nigeria indexes from Frontier to standalone markets status

MSCI Incorporated, a leading provider of critical decision support tools and services for the global investment community has announced that the MSCI Nigeria Indexes will be reclassified from Frontier Markets to Standalone Markets status in one step coinciding with the February 2024 Index Review.

In order to facilitate index replicability at the time of the reclassification, MSCI will delete each Nigerian security from the MSCI Frontier Markets Indexes at a price that is effectively zero as of the close of February 29, 2024.

This conclusion follows feedback received from market participants from its recent extended Consultation on a Market Reclassification Proposal for the MSCI Nigeria Indexes.

Since March 2020, liquidity challenges in the Nigerian foreign exchange (FX) market have consistently affected the accessibility of its equity market, leading to ongoing capital repatriation concerns and a significant gap between the official and parallel exchange rates for the Nigerian Naira.

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This has caused international institutional investors to face recurring challenges with index replicability and investability of the MSCI Nigeria Indexes and other indexes they are part of.

On June 22, 2023, MSCI announced that feedback from market participants obtained as part of the initial consultation conducted from June 2022 to June 2023 suggested that the limited accessibility of the Nigerian equity market would warrant the removal of the MSCI Nigeria Indexes from the MSCI Frontier Markets Indexes.

However, MSCI extended the consultation period to September 29, 2023 to allow more time for the liquidity situation in the Nigerian FX market to stabilize following measures announced by the Central Bank of Nigeria on June 14, 2023. No significant improvements in FX liquidity were observed by market participants during the extended consultation period, confirming that the ease of capital inflows and outflows in the MSCI Nigeria Indexes is not to the standards expected from Frontier Markets. This has led to MSCI’s decision to reclassify the MSCI Nigeria Indexes.

MSCI is a leading provider of critical decision support tools and services for the global investment community.

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By Iheanyi Nwachukwu • October 27, 2023

Iheanyi Nwachukwu

Iheanyi Nwachukwu, is a creative content writer with almost two decades journalism experience writing on banking, finance, capital markets, and tax. The multiple awards winning journalist is Assistant Editor, BusinessDay. Iheanyi holds BSc Degree in Economics from Imo State University; Master of Science (MSc) Degree in Management from University of Lagos. Iheanyi has attended several work-related trainings including (i) Advanced Writing and Reporting Skills (Pan African University, Lagos); (ii) News Agency Journalism (Indian Institute of Mass Communication {IIMC}, New Delhi, India); and (iii) Capital Markets Development and Regulations (International Law Institute {ILI} of Georgetown University, Washington DC, USA). Other trainings Iheanyi attended include: Economic/Political Risk Analysis (By Thomson Reuters Foundation); International Financial Journalism (IFJ) (By PMA Media Training, UK); Effective Business Writing Skills (By Phillips Consulting); Reporting on Corporate Governance (By International Finance Corporation (IFC) & Thomson Reuters Foundation UK); etc. In addition, he has participated in high-level economy & markets events in Dubai, South Africa, Morocco, and other African countries like Zambia, Ghana and Gambia.