… CIS says T+1 reform strengthens market, rejects pre-funding concerns
Nigeria’s quest to regain its Frontier Market status has suffered an unexpected setback after global index provider FTSE Russell postponed the country’s planned reclassification, citing concerns that its newly introduced T+1 securities settlement regime could create operational hurdles for foreign institutional investors.
The decision, announced barely one month after Nigeria became the first African capital market to migrate to a T+1 settlement cycle, has cast fresh attention on the delicate balance between market innovation and global investor accessibility, even as capital market stakeholders insist the reform strengthens rather than weakens Nigeria’s investment appeal.
Nigeria had been scheduled to regain Frontier Market status in September after FTSE Russell, in its March 2026 Interim Country Classification Review, acknowledged significant reforms undertaken by regulators and market operators following the country’s downgrade to “Unclassified Market” in 2023 due to persistent foreign exchange illiquidity and market accessibility concerns.
ALSO READ: Naira trades N1,370/$ at official FX market
However, in a surprise move on June 30, the global index provider announced that it would conduct a further assessment of the implications of Nigeria’s migration to a T+1 settlement cycle before taking a final decision expected by the end of August.
The development comes against the backdrop of one of the most ambitious reforms in the history of Nigeria’s capital market.
Effective June 1, the Nigerian market reduced its securities settlement period from two business days (T+2) to one day (T+1), becoming the first exchange on the African continent to implement the accelerated settlement framework that has already been adopted in major markets including the United States, Canada, India and China.
The reform, championed by the Securities and Exchange Commission (SEC), Nigerian Exchange Limited (NGX), Central Securities Clearing System (CSCS), the Central Bank of Nigeria (CBN) and other market institutions, was designed to reduce settlement risk, improve market liquidity, lower transaction costs and align Nigeria’s post-trade infrastructure with international best practice.
FTSE Russell, however, expressed concern that the shorter settlement timeline could make it difficult for international institutional investors operating across different jurisdictions to complete foreign exchange conversions and settlement arrangements within one business day, potentially creating conditions that resemble mandatory pre-funding, a practice regarded as inconsistent with one of its core market accessibility requirements.
But the Chartered Institute of Stockbrokers (CIS) has challenged that perception, maintaining that Nigeria’s migration to T+1 has not altered the country’s internationally recognised Delivery-versus-Payment (DvP) settlement framework.
In a position paper released by its Research and Development Division, the Institute argued that the new settlement cycle merely shortens the time between trade execution and settlement without requiring investors to deposit funds before transactions are executed.
According to the Institute, the Delivery-versus-Payment model, which remains fully operational, ensures that securities and cash are exchanged simultaneously, preserving the settlement mechanism preferred by global institutional investors while delivering the efficiency gains associated with faster settlement.
The Institute nevertheless acknowledged that the transition could pose operational challenges for some offshore investors and called for sustained engagement among regulators, global custodians, foreign investors and market operators to eliminate any implementation bottlenecks before FTSE Russell concludes its review.
It also pointed to Pakistan’s experience as evidence that a T+1 settlement framework is compatible with Frontier Market classification.
Pakistan adopted T+1 settlement in February this year and has remained a constituent of the FTSE Russell Frontier Market Index, demonstrating that accelerated settlement, when supported by efficient market infrastructure, does not automatically undermine market accessibility.
The Institute urged Nigerian authorities to utilise the review period to strengthen foreign exchange accessibility, deepen automation through straight-through processing, improve cross-border settlement coordination and provide empirical evidence that international investors can continue to participate in the market without compulsory pre-funding.
Despite the postponement, analysts believe the decision represents a temporary pause rather than a reversal of Nigeria’s capital market reform programme. They argue that if the outstanding concerns are satisfactorily addressed before FTSE Russell’s August review, Nigeria could still secure its long-awaited return to the Frontier Market Index, a development expected to boost foreign portfolio inflows, deepen market liquidity and reinforce investor confidence in Africa’s largest economy.