S&P puts Nigeria on 2027 watchlist for possible frontier market comeback

S&P DOW Jones Indices (S&P DJI) has added Nigeria to its 2027 country classification watchlist, signalling that the country’s capital market could be upgraded from standalone to frontier market status if ongoing reforms continue to improve market accessibility.

The index provider, in its 2026/2027 country classification watchlist released on Wednesday, said Nigeria has made notable progress in strengthening its regulatory environment through greater transparency, enhanced enforcement and improved market integrity. However, it stressed that additional improvements are required before any reclassification can take place.

“The Nigerian regulatory environment has modernized to improve transparency, enforcement, and market integrity,” S&P DJI said.

It added that while the reforms are designed to create a more accessible market, authorities must demonstrate consistent policy implementation and stronger operational resilience before the country can regain frontier market status.

According to S&P DJI, Nigeria will remain under observation throughout the rest of 2026, with a final decision on a possible upgrade expected during the 2027 annual country classification review.

“Consequently, S&P DJI places Nigeria on its 2027 Watchlist and will closely monitor developments for the remainder of 2026 and potentially consider Nigeria’s status for reclassification to frontier from standalone in conjunction with next year’s country classification review,” the firm said.

Nigeria was removed from the frontier market category in 2023 because of persistent foreign exchange (FX) illiquidity and difficulties faced by foreign investors in repatriating capital. The downgrade became effective in March 2024.

The latest watchlist inclusion represents the first formal step toward restoring Nigeria’s frontier market status following a series of regulatory and capital market reforms aimed at improving market efficiency and investor confidence.

The development comes only weeks after FTSE Russell postponed Nigeria’s expected return to its frontier market index despite acknowledging the significant reforms undertaken in the country’s capital market.

FTSE Russell had expressed concerns that Nigeria’s adoption of a T+1 settlement cycle could effectively make the market a prefunded one for foreign institutional investors, who might struggle to complete FX conversion and settlement within one business day.

As a result, the index provider delayed its reclassification decision, saying it would conduct a detailed review of the operational impact of the new settlement regime before announcing its verdict by the end of August 2026.

Nigeria’s capital market regulators and industry stakeholders, including the Chartered Institute of Stockbrokers, have rejected those concerns, insisting that the migration to T+1 settlement does not require transaction prefunding because the market continues to operate under the internationally recognised delivery-versus-payment (DvP) settlement framework.

They argue that although market participants may need to make operational adjustments under the shorter settlement cycle, the change does not alter the settlement model or reduce the accessibility of Nigeria’s capital market for foreign investors.