Global index provider FTSE Russell has added Nigeria to its Watch List for a possible reclassification from Unclassified to Frontier Market status.
The move signals renewed confidence in the country’s ability to repatriate foreign capital after years of foreign exchange challenges.
The action follows the release of FTSE Russell’s 2025 Annual Equity Country Classification Review, which noted that FX queues and repatriation delays have largely been cleared since early 2025.
The decision comes two years after Nigeria was removed from all FTSE global indices due to acute dollar shortages that left foreign investors unable to exit the market.
FX reforms open path to reinstatement
In a note seen by Nairametrics, FTSE said the Watch List status allows “in-depth engagement” with Nigerian authorities and market participants ahead of a potential reclassification.
“As a result of the recommendations received from the FTSE Equity Country Classification Advisory Committee and the FTSE Russell Policy Advisory Board, the FTSE Russell Index Governance Board approved the addition of Nigeria to the FTSE Watch List for possible reclassification from Unclassified to Frontier market status”, the report stated.
The step reflects feedback from investors who confirmed improvements in foreign exchange liquidity under the Central Bank of Nigeria’s (CBN) reform program.
“Following confirmation from market participants that the previous reported delays in the ability to repatriate capital from Nigeria and associated foreign exchange queues that resulted in Nigeria being downgraded to Unclassified market status from September 2023, have been cleared since the beginning of 2025.
The inclusion means Nigeria is now under observation for a possible return to the FTSE Frontier Market Index, a move that could restore its visibility to global institutional investors and attract hundreds of millions of dollars in passive inflows from funds benchmarked to FTSE indices.
However, FTSE emphasized that reinstatement is not automatic and that It will depend on continued FX stability, predictable repatriation timelines, and confirmation from investors that reforms are sustainable.
According to FTSE, the Watch List exists to “alert the wider market that in-depth engagement is taking place with a market that is being considered for a reclassification change and provides an opportunity for investors to share their experience of operating in the market in order to plan for a potential classification change.”
Market quality still uneven
Alongside the announcement, FTSE published its Quality of Markets (QoM) Review for Nigeria, which offered a mixed assessment of the capital market.
While regulatory oversight and market transparency scored well, the review highlighted persistent weaknesses in foreign exchange access, transaction costs, and derivatives development.
The FX market was rated “Not Met”, reflecting limited dollar availability and wide spreads that still frustrate portfolio investors.
Transaction costs were also deemed uncompetitive, while short-selling, stock lending, and derivatives trading remain restricted or underdeveloped.
In contrast, the report praised the Securities and Exchange Commission (SEC) and the Nigerian Exchange Limited (NGX) for maintaining active supervision and improving disclosure standards.
Nigeria’s clearing and settlement systems, operated by the Central Securities Clearing System (CSCS), were rated positively with a reliable T+3 settlement cycle and good custodian competition.
Why it matters
Nigeria’s addition to the Watch List represents a potential reversal of its 2023 downgrade, when FTSE removed the country entirely from its indices following widespread investor complaints about FX illiquidity.
The downgrade forced global passive funds to liquidate Nigerian holdings, triggering capital outflows and weakening foreign participation on the NGX. Returning to the Frontier Index would help Nigeria regain exposure among frontier-market investors and rebuild trust.
FTSE said it would continue to engage with Nigerian authorities and international investors to monitor the progress of reforms. The outcome of this engagement will determine whether Nigeria is reclassified in the next review cycle.
