FTSE Russell Flags T+1 Settlement Concerns, Places Nigeria’s Reclassification Under Review

The decision introduces uncertainty over Nigeria’s expected return to the FTSE Frontier Market Index, a development widely viewed by market participants as a catalyst for stronger foreign portfolio investment (FPI) inflows into the domestic equities market.

FTSE Russell said it will undertake a comprehensive assessment of the implications of Nigeria’s transition from a T+2 to a T+1 settlement cycle before reaching a final decision, which is expected by the end of August 2026.

Nigeria had been upgraded from “Unclassified” to “Frontier Market” status during FTSE Russell’s March 2026 interim country classification review, with the reclassification scheduled to become effective in September 2026.

However, the index provider said the implementation of the T+1 settlement framework on June 1, 2026, requires further evaluation because it could effectively transform Nigeria into a prefunded market for international institutional investors.

Under the T+1 regime, equity trades are settled one business day after execution instead of the previous two-day settlement cycle. While the shorter settlement period is intended to improve market efficiency and align Nigeria with evolving global market practices, FTSE Russell warned that it may require foreign investors to prefund transactions before trades are executed.

According to the index provider, mandatory prefunding is viewed negatively under its “Settlement Cycle (Delivery versus Payment)” criterion, one of the five core Quality of Markets measures used in determining eligibility for Frontier Market classification.

“From 01 June 2026, the Nigerian equity market transitioned from a T+2 to T+1 settlement cycle, which could result in Nigeria becoming a de facto prefunded market for international institutional investors,” FTSE Russell said.

It added that a requirement to prefund equity trades would negatively affect the market’s assessment under its settlement criteria, prompting the need for additional review before implementing Nigeria’s planned reclassification.

“Consequently, the reclassification of Nigeria is under further review to assess the implications of the transition to a T+1 settlement cycle for international institutional investors. FTSE Russell will provide an update on the status of Nigeria’s potential reclassification to Frontier Market status by the end of August 2026,” the organisation stated.

The latest development could delay a key milestone in Nigeria’s efforts to restore investor confidence and attract foreign capital into its equity market following years of subdued participation by offshore investors.

A return to Frontier Market status would increase Nigeria’s visibility among global asset managers and index-tracking funds, many of which allocate capital based on benchmark indices. Such a reclassification is expected to support foreign portfolio inflows, improve market liquidity and broaden the domestic investor base.

Conversely, any delay in the reclassification process could postpone those expected inflows as international investors await greater clarity on the operational impact of the country’s settlement framework.

Market analysts say FTSE Russell’s final decision will be closely watched by both domestic and offshore investors, as it will provide a clearer indication of whether Nigeria’s recent market reforms are sufficient to restore its standing within the global investment community.

The outcome of the review, expected by the end of August, will determine whether Nigeria proceeds with its planned return to the FTSE Frontier Market Index in September or remains under review pending further assessment of its market infrastructure.