Nigeria’s hopes of attracting fresh foreign investment into its stock market have
suffered a setback after global index provider FTSE Russell delayed a final
decision on returning the country to its Frontier Market index.
The move has created fresh uncertainty over the expected inflow of billions of
naira from foreign portfolio investors, even as market experts say the review is
not a rejection of Nigeria’s progress.
FTSE Russell said it needs more time to examine the impact of Nigeria’s new
stock trading settlement system before deciding whether the country should
regain its Frontier Market status.
The global index provider had, in March 2026, upgraded Nigeria from
“Unclassified” to “Frontier Market” during its interim review, with the change
expected to take effect in September this year.
However, in its latest update released yesterday, FTSE Russell said a final
decision would now be announced by the end of August 2026.
According to the organisation, the review became necessary after the Nigerian
stock market adopted a T+1 settlement cycle on June 1, 2026. Under the new
system, buyers and sellers complete transactions one business day after a trade,
instead of the previous two-day settlement period.
Explaining its concerns, FTSE Russell said the new arrangement could make
Nigeria “a de facto prefunded market” for international institutional investors.
“From 01 June 2026, the Nigerian equity market transitioned from a T+2 to T+1
settlement cycle, which could result in Nigeria becoming a de facto prefunded
market for international institutional investors,” the index provider stated.
In simple terms, this means foreign investors may have to provide funds before
their trades are completed, making it more difficult or expensive for some
global investment firms to trade Nigerian stocks.
Under FTSE Russell’s rules, such a requirement is viewed as a drawback when
assessing whether a market is easily accessible to international investors.
Market analysts say the latest development could delay the return of foreign
investors who have been waiting for Nigeria’s re-entry into the Frontier Market
index.
If Nigeria eventually regains the status, many global investment funds that track
FTSE Russell’s indices are expected to increase their investments in Nigerian
equities, boosting trading activity and improving liquidity on the Nigerian
Exchange.
However, analysts stressed that the ongoing review should not be interpreted as
a rejection of Nigeria’s application.
Rather, they said, FTSE Russell wants to be certain that the country’s new
trading system will not create unnecessary hurdles for foreign institutional
investors.
The adoption of a T+1 settlement cycle is in line with global trends, as many
advanced markets have shortened settlement periods to reduce risks and
improve efficiency. The issue, experts noted, is whether the Nigerian system
can accommodate international investors without forcing them to pre-fund
transactions.
A prolonged delay could postpone the inflow of foreign funds that typically
follow changes in global market indices. It may also affect investor confidence
at a time Nigeria is working to rebuild foreign participation in its capital market
after years of currency volatility, foreign exchange shortages and difficulties in
repatriating investment proceeds.
Despite the uncertainty, local investors are not expected to experience any
immediate impact, as trading on the Nigerian Exchange Limited will continue
under the new settlement arrangement while FTSE Russell completes its
assessment.