FTSE re-entry triggers foreign demand for Nigerian equities

Following Nigeria's re-entry into FTSE Russell's Frontier Market indexes, foreign and institutional investors have returned to Nigerian equities, triggering a sharp increase in trading activity on major banking tickers, according to the source. This development comes after Nigeria was downgraded to "Unclassified" status in September 2023 due to severe foreign-exchange illiquidity and other issues.

The Central Bank of Nigeria's extensive structural reforms, including moving to a T+1 settlement cycle and clearing foreign-exchange backlogs, allowed FTSE Russell to confirm Nigeria's compliance with all five quality-of-markets criteria. Zenith Bank Plc, Guaranty Trust Holding Company Plc, and FirstHoldCo Plc saw the most initial demand, demonstrating selective portfolio rebalancing as index managers gained direct access to the Nigerian exchange.

Analysts at Meristem Securities Limited predict increased foreign demand for naira-denominated government securities, improved secondary-market liquidity, and potentially lower bond yields. The NGX Group's CEO, Temi Popoola, emphasized that the reclassification serves as a gateway to greater international attention and capital formation opportunities.