Index creators, MSCI threatened that it will yank Nigeria off its index by the end of April if forex restrictions continue to hamper repatriation of money by foreign portfolio investors. The threat is coming on the back of stringent CBN restrictions which has affected the outflow of forex out of the country, a situation economist refer to as Capital Controls.
When this news broke about fortnight ago, the equities markets reacted with a sharp drop and investors started dumping stocks in droves. The news also coincided with most stocks being marked down as date for closure of their books for dividends approached. As the market opens this week, retail investors will be smart to review their portfolios for potential stocks that may be significantly affected if the MSCI makes do its threats.
Currently, about 10 stocks are listed in the MSCI Index for Nigeria with different weighting. Here they are;
Analysts inform Nairametrics that most foreign investors rely on this index to invest in emerging markets such as Nigeria and as such will most likely inform brokers in Nigeria to pull out of these stocks. Most funds utilized for investing in equities markets are indexed, meaning that they mirror the index in their portfolios by purchasing shares in these companies in proportion to their weighting. With Nigeria now being on the verge to being delisted, these stocks may witness further sell-offs despite hitting several multi-year lows.