Adeola Oyedele
When FTSE Russell announced that it would place Nigeria’s planned reclassification to Frontier Market status under further review following the Securities and Exchange Commission’s (SEC) adoption of a T+1 settlement cycle, the news naturally attracted attention. For some observers, it raised questions about whether Nigeria’s latest market reform had inadvertently created new barriers for foreign investors.
That interpretation, however, misses the bigger picture. The more important question is this: should a market be penalised for adopting the very reforms that the world’s leading financial centres have embraced?
To answer that question properly, it is important to separate the principle of T+1 from the operational adjustments required to implement it. At its core, T+1 is not an experimental policy. It is rapidly becoming the global standard. Settlement simply refers to the period between the execution of a trade and the final exchange of cash and securities. By reducing that period to one business day, T+1 lowers counterparty risk, improves liquidity, enables capital to be recycled more quickly and strengthens market resilience. These are the same objectives that informed its adoption across major markets, including the United States, Canada, Mexico and India, while the United Kingdom and the European Union (EU) are preparing similar transitions.
The concern raised by FTSE Russell is therefore not about T+1 itself, but about whether a shorter settlement cycle could create operational challenges for some international investors, particularly around foreign exchange funding and time-zone differences. That is a legitimate issue to examine, but it should not be mistaken for a fundamental change in Nigeria’s settlement framework.
Nigeria continues to operate a Delivery versus Payment (DvP) model, under which cash and securities are exchanged simultaneously at settlement. The migration to T+1 shortened the settlement cycle, but it did not introduce mandatory trade-date prefunding. In preparation for the transition, the market also redesigned its settlement timetable following extensive engagement with international custodians, moving settlement from 8:00 a.m. to 5:00 p.m. on T+1. That adjustment gives participants significantly more time to complete funding and operational processes. Foreign investors are required only to ensure funds are available before the settlement cut-off on settlement day, preserving the flexibility to execute trades before arranging funding. In other words, T+1 changes when settlement occurs, not how settlement occurs.
Like every market that has adopted T+1, Nigeria’s post-trade ecosystem will continue refining operational processes as market participants adapt. That evolution is a normal feature of market modernisation, not evidence of structural weakness.
Nigeria’s recent market performance provides important context. Over the past year, the capital market successfully facilitated more than N3 trillion in capital raising through the banking sector recapitalisation programme, one of the largest capital formation exercises undertaken on the African continent. More significantly, much of that capital came from domestic institutional and retail investors, underscoring the growing depth and resilience of Nigeria’s local investment base. For years, the narrative centred on Nigeria’s dependence on foreign portfolio flows. The recapitalisation exercise demonstrated a market increasingly supported by domestic capital, a hallmark of mature and resilient financial systems.
The point is not that domestic capital formation eliminates the need for foreign investors. It is that Nigeria’s market should be assessed in the round, not through one operational concern alone. Market quality is equally reflected in liquidity, governance, regulatory effectiveness, technological infrastructure, transparency, investor participation and, ultimately, its ability to mobilise long-term capital for economic development. Nigeria has continued to strengthen each of these pillars while modernising its market infrastructure in line with global standards.
None of this diminishes the importance of FTSE Russell’s review. Index providers play an important role in promoting transparency, consistency and investor confidence, and Nigeria’s regulators and market institutions should continue engaging constructively by providing data and demonstrating the strength of the market’s operational framework.
That engagement, however, should be undertaken from a position of confidence rather than anxiety. Nigeria did not adopt T+1 to satisfy an index methodology. It adopted T+1 because faster settlement reduces risk, improves efficiency and positions the market alongside the direction in which global finance is moving. Reversing, or even delaying, that strategic direction simply to preserve an index classification would amount to sacrificing meaningful structural progress for a label.
The better course is to stay the course. Continue strengthening market infrastructure. Continue improving coordination across the post-trade ecosystem. Continue engaging openly with international investors and global index providers. Above all, continue modernising.
Capital markets are ultimately judged not by how comfortable they make legacy processes, but by how effectively they support investment, manage risk and finance economic growth. By embracing T+1, Nigeria has chosen to modernise alongside the world’s leading markets. That is a decision worth defending, and one the market should pursue with confidence.
* Ms Oyedele, a capital market analyst, writes from Abuja
