US-based provider of equity, fixed income, and hedge fund stock market indexes, MSCI announced earlier in the month that it was considering yanking off Nigeria from its MSCI Emerging market index. A decision is expected to be announced tomorrow, April 29th.
Information reaching Nairametrics however suggest that the decision to yank Nigeria off may however be rescinded as they believe the forex concern about Nigeria “is not structural.” According to our source MSCI may rather than yank Nigeria off include a narrative that suggests that the matter will be revisited as they continue to review Nigeria’s forex situation.
Nairametrics also gathers that the decision not to yank Nigeria of the MSCI Index is not unconnected to the fact that Nigeria constitutes about 12% of the index. If Nigeria is yanked off and then the forex situation is subsequently relaxed, getting Nigeria back in could trigger significant volatility which indexes try to avoid at all cost.
The Nigerian economy is currently undergoing significant strain mainly due to the massive drop in the price of crude oil. GDP Growth rate has dropped to its lowest levels since 1999 and inflation rate has risen t0 12.7 percent from about 9 percent a few months ago. This has also impacted negatively on the equities market for at least the last two years as investors pull out billions out of the stock market.
The CBN introduced capital controls early 2015 to stem the demand for scare dollars triggering a currency crisis that has resulted in a huge disparity between the official and black market rates. Analysts believe over $5 billion in pent-up demand is with banks awaiting to be met by CBN forex sales. The CBN has said it will only prioritize sale to essential sectors of the economy of which the capital market is not one.