S&P places Nigeria on watchlist for Frontier Market reclassification
S&P Dow Jones Indices has placed Nigeria on its 2027 watchlist for a potential reclassification as a Frontier Market, citing regulatory reforms.
S&P Dow Jones Indices (S&P DJI) has placed Nigeria on its 2027 watchlist for a potential reclassification as a “Frontier” market, citing regulatory reforms aimed at improving transparency, market integrity and accessibility. The global index provider disclosed this in a notice released on Wednesday, noting that it will monitor developments in Nigeria for the remainder of 2026 before deciding whether to reclassify the country from its current “Standalone” status to “Frontier” during its 2027 Country Classification Annual Review.
According to S&P DJI, Nigeria’s regulatory environment has undergone significant modernisation designed to improve market transparency, enforcement and integrity. “The Nigerian regulatory environment has modernized to improve transparency, enforcement, and market integrity,” the notice stated. “While these reforms are intended to support a structurally more accessible market, consistency in policy application and operational resilience are required for reclassification.”
Based on these developments, the index provider said Nigeria would remain under close observation throughout the rest of the year before a final decision is taken in 2027.
The announcement comes barely a week after another global index provider, FTSE Russell, halted its initial plans to reclassify Nigeria as a Frontier Market this September, citing recent developments in the market.
A return to Frontier Market status would improve Nigeria’s visibility among global institutional investors that benchmark their portfolios against frontier market indices. Such a reclassification could also increase passive investment flows into Nigerian equities from funds that track frontier market benchmarks, while reinforcing confidence in the country’s capital market reforms.
Nigeria is currently classified as a Standalone market by S&P DJI, a category reserved for markets that do not fully meet the criteria for inclusion in either frontier, emerging or developed market indices.
S&P DJI removed Nigeria from its Select Frontier Index and reclassified the market to “Standalone” status, effective November 1, 2023, citing accessibility issues for international investors in Nigeria. Specifically, the organisation mentioned the Central Bank of Nigeria’s issuance of new guidelines, saying it was causing delays in capital repatriation and preventing international investors from exiting their Nigerian positions.
“Despite the efforts by Nigerian authorities to address the market liquidity issues in the foreign exchange market, and the significant delays in capital repatriation, these measures are yet to represent a short or even medium-term solution for market participants,” S&P DJI stated in justifying its removal of Nigeria from Frontier Market status in 2023.
In addition to Nigeria, S&P DJI added Indonesia and Turkey to its 2027 watchlist. The index provider said both countries are being monitored for regulatory and market-accessibility concerns that could result in special measures or reclassification to Frontier status if conditions deteriorate.
This echoes the 2020 downgrade, when Nigeria was removed from the FTSE Frontier Index due to currency restrictions. The mechanism then was different, but the result was the same: Nigeria’s capital market became less accessible to foreign investors.
The winners: Nigerian investors and the capital market, which would benefit from increased foreign investment. The losers: the Nigerian government, which must demonstrate consistent policy implementation, and foreign investors, who have been waiting for Nigeria to resolve its accessibility issues.
Bottom Line: S&P has put Nigeria on notice. The country has until 2027 to prove it deserves Frontier status. The clock is ticking.