The Chartered Institute of Stockbrokers (CIS) has defended Nigeria’s capital market reforms following FTSE Russell’s decision to delay the country’s expected reclassification to Frontier Market status, arguing that the postponement reflects a technical assessment of the new T+1 settlement regime rather than a setback for ongoing market reforms.
The Institute said the review offers regulators and market participants an opportunity to demonstrate that Nigeria’s capital market infrastructure remains globally competitive and fully capable of supporting international institutional investors without imposing additional settlement risks.
FTSE Russell announced on June 30 that it would defer Nigeria’s planned return to its Frontier Market Index to allow further assessment of the operational implications of the country’s migration from a T+2 to a T+1 securities settlement cycle, particularly for foreign portfolio investors operating across multiple markets and time zones.
However, CIS maintained that Nigeria’s adoption of the shorter settlement cycle, which took effect on June 1, represents one of the most significant structural reforms undertaken by the domestic capital market in recent years and positions the country at the forefront of capital market innovation in Africa.
According to the Institute, Nigeria became the first African market to implement the T+1 settlement framework, bringing its post-trade infrastructure closer to international best practice already embraced by several advanced financial markets.
The Institute noted that faster settlement cycles reduce counterparty risk, improve market liquidity and enhance operational efficiency—factors increasingly considered important by global investors evaluating emerging and frontier markets.
“The introduction of T+1 settlement demonstrates Nigeria’s commitment to international best practices and strengthens the country’s competitiveness within the global investment community,” CIS said.
The Institute explained that FTSE Russell’s review centres primarily on operational considerations rather than concerns about the integrity of Nigeria’s market infrastructure.
Specifically, the global index provider is assessing whether the compressed settlement timeline could inadvertently create a de facto prefunding requirement for foreign institutional investors, particularly those managing transactions across different jurisdictions.
CIS argued that such concerns should not be interpreted as evidence of structural deficiencies in Nigeria’s capital market.
According to the Institute, the migration to T+1 has not altered Nigeria’s internationally recognised Delivery versus Payment (DvP) settlement model, under which securities and cash are exchanged simultaneously upon settlement.
“The implementation of T+1 does not require foreign portfolio investors to prefund their transactions. The market continues to operate under internationally recognised Delivery versus Payment principles, with the only change being the reduction of the settlement period from two business days to one,” the Institute stated.
It acknowledged that the shorter settlement cycle presents operational adjustments for global investors but said these are manageable through continued collaboration among regulators, custodians, brokers and market operators.
“We recognise the operational challenges arising from the shortened settlement cycle. Accordingly, sustained engagement and constructive collaboration with all stakeholders will be crucial to refining the reforms, addressing emerging issues, and ensuring that no category of investor is disadvantaged or unintentionally excluded from participating in the Nigerian capital market,” CIS added.
The Institute said the current review period should be viewed as an opportunity to provide empirical evidence that Nigeria’s settlement infrastructure allows foreign investors to complete transactions efficiently without compulsory prefunding.
It also pointed to Pakistan’s experience as evidence that accelerated settlement systems are compatible with Frontier Market classification.
Pakistan adopted a T+1 settlement cycle earlier this year while retaining its position in FTSE Russell’s Frontier Market Index, demonstrating that shorter settlement periods do not necessarily conflict with global index eligibility where appropriate operational safeguards exist.
To strengthen Nigeria’s case, CIS urged market stakeholders to continue reforms aimed at improving foreign exchange accessibility, expanding straight-through processing, enhancing cross-border settlement coordination and providing greater operational certainty for international investors.
The Institute said these measures would reinforce investor confidence while supporting Nigeria’s ambition to regain Frontier Market status.
While the postponement delays the country’s anticipated re-entry into the FTSE Russell Frontier Market Index, CIS expressed confidence that the outstanding technical issues can be resolved before the review process concludes.
“The current review should be seen as an opportunity to validate the resilience and efficiency of Nigeria’s capital market infrastructure. With continued collaboration among regulators, exchanges, custodians, brokers and international investors, Nigeria remains well positioned to secure its return to Frontier Market status and further strengthen its reputation as one of Africa’s most dynamic investment destinations,” the Institute concluded.
