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Morgan Stanley raises Nigeria’s weighting, standalone decision still ahead

By Peter Egwuatu

FOLLOWING the recent rebalancing of the Morgan Stanley Capital International (MSCI) Frontier Index, Nigeria’s weighting in the index increased to 7.9 per cent  from 6.5 per cent.

In this development, analysts from Cardinal Stone Research, a Lagos based investment house, yesterday, said that it has reviewed the details of recent announcement by the MSCI ahead of the planned announcement (on June 20) of a reclassification (or not) of Nigeria to ‘Standalone’ status.

The increase in the weighting followed the move of Pakistan from the Frontier Markets Index to the Emerging Markets Index.

There are 16 Nigerian stocks in the index and the new weightings are shown as follows: Nigerian Breweries 1.76 per cent; Guaranty Trust Bank 1.45 per cent;  Zenith Bank 0.86 per cent, NESTLE 0.80 per cent; Dangote Cement  0.60 per cent; UBA  0.40 per cent: Access Bank  0.33 per cent;  Stanbic IBTC 0.32 per cent;  FirstBank Nigeria  Holding  0.27 per cent; Seplat 0.24 per cent. Others are: Guinness Nigeria  Plc 0.22 per cent, Ecobank Transnational Incorporated, ETI 0.22 per cent, WAPCO 0.21 per cent, Unilever Nigeria  0.20 per cent, PZ Nigeria  0.06 per cent, Forte Oil  0.05 per cent, and Total Nigeria 7.90 per cent.

According to Cardinal Stone Research, “a total number of 14 funds worth $969 million currently track the MSCI Frontier Index according to data from Bloomberg. We think that following the events of the past one to two years, most of these funds sold off Nigerian equities and many are still underweight Nigeria. Decision on reclassification still ahead, but we expect a positive outcome – Nigeria is currently under review for a potential reclassification as part of the MSCI 2017 Annual Market Classification Review.”

It should be noted that the decision to review Nigeria’s status to “Standalone”, from the Frontier Markets Index, came on the heels of the liquidity issues that plagued the country’s foreign exchange (FX) market.

According to Morgan Stanley, the introduction of restrictions on foreign currency trading in the first half of 2015 as well as the huge scarcity of the green back resulted in a deterioration of market accessibility, and thus consultations with market participants would be held until a decision is taken and announced by June 2017.

However, following the Central Bank of Nigeria’s (CBN) consistent supply of FX to the market, liquidity has improved significantly across the market’s major segments – the interbank, the newly introduced investors/exporters FX (NAFEX) window and the parallel market.


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