Market News

By Hari Govind

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

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.”

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. 

More details from MSCI on other markets:

• MSCI continues to welcome feedback on the level of market accessibility of the Sri Lankan equity market and will consult with market participants to gather feedback if there are any further developments
• MSCI will continue to monitor the developments in the Russian equity market’s accessibility and will consult with market participants if there are any relevant changes in the market’s conditions
• MSCI also noted the evolution of clearing and settlement cycles across global markets

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