‘FTSE downgrade will cause huge damage to capital market, economy’

Nigeria’s FTSE downgrade from frontier market to unclassified will cause a colossal damage to the capital market and erode investor confidence, unless urgent steps are taken to reverse the trend, experts have said.

Rating agency, FTSE Russell on Monday, downgraded Nigeria from frontier to unclassified market status over inability of investors to repatriate capital.

Experts described the downgrade as realistic, saying the warning signal to foreign investors that the nation’s fragile economy poses substantial risk to the stock market will undermine efforts to restore confidence in the market.

According to them, failure by Central Bank of Nigeria (CBN) to meet its foreign exchange (forex) obligation, alongside the nation’s precarious economic fundamental, is a big threat to economic growth.

Vice President of Highcap Securities Limited, David Adonri, urged Federal Government to facilitate settlement of forex obligations and debt to restore foreign investor confidence in the market.

He said: “The downgrade is a transferred aggression against the capital market, based on the default of CBN in settling its forex obligation to foreign investors. This collateral damage to reputation of the capital market has far-reaching implications.

“On the other hand, mixed signals have continued to emanate from the market as banks’ fundamentals get stronger while other sectors suffer deteriorating fundamentals.

“Can it, therefore, be postulated that the economy has been rigged in favour of banks? With the ongoing pro-market reforms, the increased forex accretion should facilitate settlement of debts by Federal Government/CBN, to restore foreign investor confidence,” he said.

Professor of Economics, Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Sheriffdeen Tella, said the downgrade in the market space is in order, given the country’s inability to meet both foreign investors and manufacturers’ demand for forex.

He said there is need for government to be more decisive and tackle the problem of forex shortage in Nigeria head on, to reverse the trend before the end of the year.

Professor of Finance, University of Nigeria Nsukka, Chuke Nwude, said FTSE is simply being realistic, noting that the country does not have sustainable development and growth trajectories.

“How can’t it be like that when our production capacity is dwindling daily? More blue chip companies are planning to exit the capital market and do away with the Nigeria economy due to lack of hope for better days,” he added.