MSCI to Downgrade Nigeria Indexes over Difficult FX Repatriation
Godwin Emefiele, CBN Gov

MSCI to Downgrade Nigeria Indexes over Difficult FX Repatriation

UPDATED: MSCI Inc. (NYSE: MSCI), a leading provider of critical decision support tools and services for the global investment community, announced today the launch of a consultation on a proposal for potential reclassification of the MSCI Nigeria Indexes from Frontier Markets to Standalone Markets status.

The consultation proposal to downgrade Nigeria Indexes to standalone status comes after previous warnings to investors about foreign currencies scarcity in Africa’s largest economy due to capital control measures initiated by the apex bank to stem the local currency from free-falling.

In the recent document obtained by MarketForces Africa, MSCI said since March 2020, accessibility issues have persisted in the Nigerian equity market. The repatriation of funds from investments in the market remains extremely difficult for foreign investors due to low liquidity in the Nigerian foreign exchange market.

As a result, market participants have continuously expressed concerns related to the investability and replicability of the MSCI Nigeria Indexes, according to the statement. READ: Nigeria: Funds Repatriation Extremely Difficult for Foreign Investors -MSCI

“There has been a continual and severe deterioration in the ability to repatriate funds from Nigeria. As a result, since May 2020, a special treatment has been in place to reduce the number of potential changes in the relevant MSCI Equity Indexes,” said Mr. Craig Feldman, Global Head of Index Management Research and member of the MSCI Index Policy Committee.

“Given the prolonged nature of the issues affecting the market’s accessibility, we have put forth the consultation to reclassify the MSCI Nigeria Indexes from Frontier Markets to Standalone Markets status.”

It also announced the results of the MSCI 2022 Market Classification Review, saying that a significant portion of the deteriorations in market accessibility ratings during this year’s review was caused by the negative developments in Russia, which led to complete inaccessibility of its equity market to international institutional investors.

This resulted in the reclassification of the MSCI Russia Indexes from Emerging Markets to Standalone Market status in March 2022,” said Dr. Dimitris Melas, Global Head of Index Research and Product Development and Chairman of the MSCI Index Policy Committee. #MSCI to Downgrade Nigeria Indexes over Difficult FX Repatriation