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MSCI, a leading provider of global equity indexes, said on Tuesday that it has launched a consultation to remove Nigeria from the MSCI Frontier Market Indexes, which is tracked by $12 billion worth of assets, and reclassify Nigerian equities to “Standalone Market Status.”

The New York-based firm stated this ahead of the announcement of the “flexible forex policy” by the Central Bank of Nigeria (CBN) on Wednesday. MSCI said the move might become necessary because of a sharp decline in liquidity in the Nigerian foreign exchange market and stiff capital controls imposed by the CBN.

The MSCI Standalone Market Indexes are not included in the MSCI Emerging Markets Index or MSCI Frontier Markets Index. African countries in the MSCI Standalone Market Indexes are Botswana, Ghana, Senegal, Cote d'Ivoire, Burkina Faso and Zimbabwe.

MSCI had issued a notice on April 8, 2016, in which it warned against a possible exclusion of Nigeria from its Frontier Markets Index. In May, the index provider said it will place Nigeria under a "special treatment" status in its 2016 Semi-Annual Index Reviews. It also said some individual stocks that no longer meet its criteria will be deleted from its indexes.   

MSCI said the CBN’s intervention had impaired the ability of international institutional investors to repatriate capital to a point where the “investability” of the Nigerian equity market is being questioned.

“Due to the urgent nature of this investability issue in the MSCI Nigeria Index, MSCI will announce its decision on the proposal to remove the MSCI Nigeria Index from the MSCI Frontier Markets Index by the end of September 2016,” the index provider said.

On Wednesday, the CBN Governor, Godwin Emefiele said the apex bank will commence an open, transparent two-way forex market system that will be will be market-driven. The objective will be to boost forex supply and address the liquidity challenges.  

Ten Nigerian stocks are currently included in MSCI’s Frontier Market Index. They are: Nigerian Breweries, Nestle Nigeria, Guaranty Trust Bank, Dangote Cement, Zenith Bank, Forte Oil, Lafarge Africa, Ecobank Transnational, Seplat Petroleum, and Guinnes Nigeria.

As at April 19th, the market capitalization of MSCI’s Frontier Market Index stood at $91.58 billion, with Nigerian stocks having a weight of 10.9 percent amounting to about $10 billion.

Apart from Nigeria, other African countries in the MSCI Frontier Markets Index are Kenya, Mauritius, Morocco and Tunisia. Egypt and South Africa are included in MSCI Emerging Markets Index.