Nigeria’s return to London-based frontier market index hits fresh hurdle over new stock settlement rules

Nigeria’s planned return to the FTSE Russell Frontier Market Index has hit a fresh obstacle after the global index provider paused the country’s reclassification, citing concerns that a new stock settlement rule could make investing more difficult for international investors.

• FTSE Russell has placed Nigeria’s planned return to Frontier Market status under further review.
• The index provider says Nigeria’s new T+1 settlement system could require foreign investors to pre-fund equity trades.
• The decision delays a key milestone in Nigeria’s efforts to restore global investor confidence after years of FX challenges.
• Market operators argue the review overlooks wider reforms that have modernised the country’s capital market.

The London-based index provider said Tuesday that Nigeria’s planned upgrade from “Unclassified” to “Frontier Market,” scheduled to take effect in September, is now under further review following the country’s transition to a T+1 settlement cycle.

FTSE Russell said the shorter settlement period may effectively require international institutional investors to pre-fund equity trades before transactions are completed, weakening one of the key market quality standards used in its country classification framework.

The organisation said it will announce the outcome of its review by the end of August.

The decision is an unexpected setback for Nigeria, which only secured approval for its return to the Frontier Market category in March after spending nearly three years outside the index.

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Nigeria lost its Frontier Market status in 2023 after prolonged foreign exchange shortages, capital repatriation delays and currency restrictions made it difficult for international investors to move money into and out of the country.

Since taking office in 2023, President Bola Tinubu’s administration has introduced sweeping foreign exchange reforms, including liberalising the naira, clearing part of the backlog of unmet foreign exchange demand and implementing broader financial market reforms aimed at restoring investor confidence.

The planned FTSE reclassification was widely viewed as international recognition that those reforms had improved market accessibility.

However, Nigeria’s latest capital market reform has now become the focus of attention.

On June 1, Nigerian Exchange Limited shortened its settlement cycle from T+2 to T+1, meaning equity transactions are completed one business day after trading instead of two.

The change aligns Nigeria with some of the world’s largest markets, including the United States, Canada and India, which have adopted faster settlement systems to improve market efficiency, reduce counterparty risk and free up capital more quickly.

But unlike domestic investors, many foreign institutional investors first need to convert foreign currency into naira before purchasing Nigerian equities.

With only one day to complete that process, investors may be forced to provide funds before trades are executed, increasing foreign exchange exposure and operational risk.

FTSE Russell said that requirement is viewed negatively under its Delivery versus Payment (DvP) settlement criterion, one of the five core measures used to determine Frontier Market eligibility.

The review comes as Nigeria continues trying to attract foreign capital back into its equity market.

Data from Nigerian Exchange Limited show foreign portfolio investment in Nigerian equities fell 17.4% in the first five months of 2026 to ₦400.1 billion ($260 million) compared with the same period last year, highlighting that overseas participation remains well below pre-crisis levels.

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A prolonged delay or reversal of Nigeria’s planned upgrade could further weaken international investor appetite because many global fund managers use FTSE Russell’s country classifications when deciding where to allocate capital.

Another major index provider, MSCI, is also closely monitoring Nigeria’s market reforms.

MSCI removed Nigeria from its Frontier Markets Index in 2024 after similar concerns over foreign exchange liquidity and market accessibility and has yet to restore the country despite acknowledging improvements.

Despite FTSE Russell’s decision, Nigerian capital market operators insist the review does not reflect the broader progress made by the country’s financial markets.

They argue that regulators have implemented significant reforms over the past three years, including improvements in market infrastructure, technology, transparency, settlement efficiency and foreign exchange accessibility, all aimed at bringing Nigeria closer to international standards.

For investors, however, the next two months will be critical. FTSE Russell’s decision, expected by the end of August, will determine whether Nigeria regains its place in one of the world’s leading frontier market indices or faces another delay in its effort to rebuild international investor confidence.