Nigeria Gains FTSE Watch List Spot, Eyes Frontier Market Comeback

In a significant development for Nigeria’s capital markets, global index provider FTSE Russell has added the country to its Watch List for potential reclassification from “Unclassified” to “Frontier Market” status. This move, announced in FTSE Russell’s 2025 Annual Equity Country Classification Review, signals a renewed vote of confidence in Nigeria’s financial reforms—particularly its efforts to resolve long-standing foreign exchange (FX) bottlenecks that had previously alienated global investors.

A Step Toward Redemption

The inclusion on the Watch List marks a potential reversal of Nigeria’s 2023 downgrade, when the country was removed from all FTSE global indices due to severe FX liquidity constraints. At the time, foreign investors faced prolonged delays in repatriating capital, leading to widespread frustration and a mass exodus from Nigerian equities. The downgrade triggered forced liquidations by passive funds and significantly weakened foreign participation on the Nigerian Exchange (NGX).

Now, with FX queues reportedly cleared and capital repatriation timelines improving, Nigeria is once again under consideration for inclusion in the FTSE Frontier Market Index—a move that could restore its visibility among global institutional investors and unlock hundreds of millions of dollars in passive inflows.

According to FTSE Russell, the decision to place Nigeria on the Watch List was based on recommendations from its Equity Country Classification Advisory Committee and Policy Advisory Board. The FTSE Russell Index Governance Board approved the move following confirmation from market participants that FX-related delays had been resolved since early 2025.

The Central Bank of Nigeria (CBN) has been at the heart of these reforms, implementing measures aimed at improving FX liquidity, streamlining repatriation processes, and stabilizing the naira. These efforts have been met with cautious optimism by investors, who now see Nigeria as a market gradually regaining its footing.

FTSE Russell emphasized that the Watch List status allows for “in-depth engagement” with Nigerian authorities and market participants. It also provides a platform for investors to share their experiences and expectations, which will inform the final decision on reclassification.

Reinstatement Not Guaranteed

Despite the positive momentum, FTSE Russell made it clear that reinstatement is not automatic. Nigeria must demonstrate sustained FX stability, predictable repatriation timelines, and continued progress on broader market reforms. The country’s performance will be closely monitored over the coming months, with feedback from investors playing a critical role in the reclassification decision.

The Watch List serves as a signal to the global investment community that Nigeria is under active review. It also offers a window for stakeholders to prepare for a potential classification change, which could have far-reaching implications for portfolio allocations and capital flows.

Mixed Signals in Market Quality Review

Alongside the Watch List announcement, FTSE Russell released its Quality of Markets (QoM) Review for Nigeria. The report offered a nuanced assessment of the country’s capital market infrastructure, highlighting both strengths and persistent challenges.

On the positive side, Nigeria scored well in regulatory oversight and market transparency. The Securities and Exchange Commission (SEC) and the Nigerian Exchange Limited (NGX) were commended for their active supervision and efforts to improve disclosure standards. The Central Securities Clearing System (CSCS) also received praise for its reliable T+3 settlement cycle and competitive custodian environment.

However, the review flagged several areas of concern:

• Foreign Exchange Access: Rated “Not Met,” reflecting continued limitations in dollar availability and wide bid-ask spreads that deter portfolio investors.
• Transaction Costs: Deemed uncompetitive, posing a barrier to market entry and exit.
• Derivatives Development: Still underdeveloped, with restrictions on short-selling, stock lending, and derivatives trading limiting market sophistication.

These shortcomings underscore the need for deeper structural reforms to enhance Nigeria’s attractiveness to foreign investors.

Why This Matters

Nigeria’s potential return to the FTSE Frontier Market Index is more than a symbolic gesture—it’s a strategic opportunity to rebuild trust and re-engage with the global investment community. Frontier market status would restore Nigeria’s eligibility for inclusion in passive investment vehicles benchmarked to FTSE indices, such as exchange-traded funds (ETFs) and index-tracking mutual funds.

This could lead to a surge in foreign portfolio inflows, boosting liquidity, deepening market participation, and supporting economic growth. It would also enhance Nigeria’s visibility on the global stage, positioning it as a reform-minded economy capable of overcoming past challenges.

For Nigerian policymakers, the Watch List designation is both a validation of recent reforms and a call to action. Continued progress on FX stability, market infrastructure, and investor protections will be essential to secure full reinstatement.

Investor Sentiment and Outlook

Investor sentiment toward Nigeria has been cautiously optimistic in recent months. The clearing of FX queues and improved repatriation timelines have alleviated some of the key concerns that led to the 2023 downgrade. However, lingering issues—such as currency volatility, inflationary pressures, and regulatory unpredictability—remain on the radar.

The FTSE Russell engagement process will serve as a litmus test for Nigeria’s commitment to reform. It will also provide valuable insights into investor perceptions, helping authorities fine-tune their policies to align with global best practices.

What Comes Next

FTSE Russell will continue to engage with Nigerian authorities and international investors in the lead-up to its next review cycle. The outcome of these discussions will determine whether Nigeria is reclassified as a Frontier Market—a decision that could reshape the country’s investment landscape.

In the meantime, stakeholders across the public and private sectors must work collaboratively to address the remaining gaps in market quality. This includes:

• Enhancing FX market depth and transparency
• Reducing transaction costs and improving competitiveness
• Expanding access to derivatives and alternative investment instruments
• Strengthening investor protections and dispute resolution mechanisms

Nigeria’s addition to the FTSE Russell Watch List is a promising development that reflects the country’s progress in addressing long-standing financial challenges. While the road to full reinstatement is still uncertain, the momentum is clearly shifting in Nigeria’s favor.

If sustained, these reforms could mark the beginning of a new chapter for Nigeria’s capital markets—one defined by resilience, innovation, and global integration.