As Nigeria’s Forex Reforms Lift Investor Confidence,Earn Frontier Markets Status

Global index compiler, FTSE Russell, has added Nigeria to its Watch List for a potential upgrade to Frontier Market status, a significant milestone that underscores the renewed investor confidence in the country’s foreign exchange reforms and improving capital repatriation environment.
The development, announced in FTSE Russell’s 2025 Annual Equity Country Classification Review, marks a possible turning point for Nigeria’s economy, nearly two years after Nigeria was expelled from all FTSE global indices due to worsening foreign exchange illiquidity and prolonged delays in investor fund repatriation.
According to the review, Nigeria has now met the five Quality of Markets criteria required for Frontier Market classification, following confirmation from global institutional investors that foreign exchange backlogs and repatriation queues have largely been cleared since the beginning of 2025.
“Market participants have reported that the aforementioned FX queues had been cleared and that international institutional investors are no longer experiencing any material delays in their ability to repatriate capital from Nigeria,” the FTSE report stated.
Nigeria’s journey back to the radar of global investors has been anything but smooth. In September 2023, FTSE Russell downgraded Nigeria from Frontier to Unclassified status, citing severe distortions in the foreign exchange market that rendered it nearly impossible for international investors to convert or repatriate their earnings.
The downgrade followed months of frustration among foreign portfolio investors, who were unable to access foreign exchange due to acute dollar shortages and restrictive policies under the previous administration. The liquidity crunch, coupled with multiple exchange rates and inconsistent market interventions, had eroded confidence in the country’s financial system.
At the time, Nigeria’s exclusion from the FTSE Frontier Index, alongside similar action by MSCI, dealt a heavy blow to the country’s reputation among emerging market investors. Several international funds consequently marked down or exited their Nigerian holdings, citing uncertainty over currency stability and policy direction.
However, the narrative began to shift with the appointment of Olayemi Cardoso as Governor of the Central Bank of Nigeria (CBN) in September 2023. Under his leadership, the apex bank embarked on a comprehensive overhaul of the foreign exchange management framework aimed at restoring market confidence and transparency.
Among the most consequential steps was the unification of Nigeria’s multiple exchange rates, a move that effectively merged the official and parallel market rates into a single, market-reflective window. This was followed by a painstaking process of clearing outstanding forex obligations, a critical step in addressing the backlog of foreign exchange requests that had discouraged foreign investors for years.
Cardoso’s team also introduced measures to enhance transparency in the Nigerian Foreign Exchange Market (NFEM), including real-time reporting of transactions and improved settlement systems. These reforms, combined with tighter monetary policy and stronger coordination with the fiscal authorities, have since led to greater stability in the forex market.
The impact has been visible. By early 2025, the CBN had successfully cleared most of the verified foreign exchange backlogs owed to airlines, manufacturers, and foreign portfolio investors. This marked a major policy victory and sent a strong signal to international markets that Nigeria was serious about rebuilding trust.
The decision by FTSE Russell to place Nigeria on its Watch List reflects growing recognition of these achievements. The index provider stated that the Watch List designation provides a structured platform for “in-depth engagement” with policymakers, market regulators, and key market participants before any final reclassification decision is made.
“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,” the firm noted.
Analysts say the move as a vote of confidence in the CBN’s current policy direction and a validation of Cardoso’s steady approach to reform. Market watchers believe that a successful reclassification could pave the way for renewed portfolio inflows into Nigeria’s equity and fixed-income markets — segments that have suffered from years of underinvestment.
Nigeria’s potential return to the FTSE Frontier Market list also carries broader implications for the economy. The country’s reclassification would make it once again eligible for inclusion in a variety of global passive investment portfolios, particularly exchange-traded funds (ETFs) and index-tracking products that follow FTSE benchmarks.
This could mean hundreds of millions of dollars in fresh foreign capital entering the Nigerian market, boosting liquidity, deepening price discovery, and potentially lowering borrowing costs for domestic firms.
Analysts say the FTSE development aligns with the government’s broader economic reform agenda, which seeks to attract foreign investment through market liberalization and fiscal discipline. Since mid-2023, the administration of President Bola Ahmed Tinubu has pursued a series of difficult but necessary policy measures, including the removal of petrol subsidies and the liberalization of the naira, aimed at correcting long-standing macroeconomic distortions.
The results of these reforms are beginning to show. Despite short-term inflationary pressures, Nigeria’s foreign reserves have stabilized, the parallel market premium has narrowed, and portfolio investment inflows have begun to recover. According to CBN data, foreign portfolio inflows into Nigeria’s capital market grew by over 35 percent year-on-year in the first half of 2025, marking the strongest rebound since 2019.
Foreign airlines and manufacturing multinationals, once vocal critics of Nigeria’s forex regime, have also acknowledged improved access to funds. With the backlog largely cleared and the market now operating more transparently, international business confidence is gradually being restored.
Nonetheless, analysts caution that Nigeria must sustain the current policy momentum to secure a full return to Frontier Market classification. FTSE Russell typically conducts detailed consultations and monitoring over several months before making a final decision.
For Nigeria, the stakes are high. A successful reclassification would not only restore its place among frontier peers such as Kenya, Vietnam, and Morocco, but also reaffirm the country’s position as the financial anchor of sub-Saharan Africa.