By Alex Ekemenah

The Alliance for Economic Research and Ethics (AERE), a Nigerian non-profit organisation working to strengthen both the private and public sectors in Nigeria, has praised the inclusion of Nigeria on the FTSE Russell watch list for potential frontier market.

AERE says the frontier market return “is a significant step towards rebuilding the country’s credibility in global capital markets”, attributing this development to the “wide-ranging fiscal and monetary policy adjustments” carried out by the Federal Government of Nigeria under President Tinubu administration.

These reforms include:

1. Reforms in the foreign exchange market: The Central Bank of Nigeria (CBN) has implemented reforms to improve foreign exchange transparency and liquidity, including the liberalization of the naira exchange rate.
2. Rationalization of fuel subsidies: The government has rationalized fuel subsidies, which has helped to reduce the financial burden on the government and improve the overall fiscal discipline.
3. Measures to improve the ease of doing business: The government has implemented measures to improve the ease of doing business, including reforms in the foreign exchange market, fiscal policy, and ease of doing business.

The implications of Nigeria’s addition to the FTSE Russell watch list, according to AERE, are:

1. Increased visibility and attractiveness to global investors: Nigeria’s inclusion on the watch list could restore its visibility to global institutional investors and attract hundreds of millions of dollars in passive inflows from funds benchmarked to FTSE indices.
2. Improved market liquidity and transparency: The reclassification could lead to increased market liquidity and transparency, as well as improved corporate governance and regulatory standards.
3. Enhanced credibility and reputation: Nigeria’s reclassification as a frontier market could enhance the country’s credibility and reputation in the global capital markets, making it more attractive to foreign investors.
4. Potential for increased foreign investment: If Nigeria is reinstated as a frontier market, its equities would once again be eligible for inclusion in the FTSE Frontier Market Index Series, potentially attracting renewed foreign portfolio inflows into the country.

AERE noted that the achievement of the above goals would depend on “continued FX stability, predictable repatriation timelines, and confirmation from investors that reforms are sustainable”.