Several media reports stating that a $400 million Exchange-Traded Fund (ETF) owned by BlackRock is “leaving” Nigeria is not true.
The ETF in question is the iShares Frontier and Select EM ETF (The Fund) and was created in September 2012 to pool equity together from different frontier markets and smaller emerging markets including Nigeria.
As of June 13, 2024, the fund has a net asset value of $384.4 million and is trading at $27.76 per share on the New York Stock Exchange Arca (NYSE Arca).
Fund not leaving Nigeria
A cursory analysis of the portfolio breakdown reveals Dangote Cement and Afriland Properties Plc were the only Nigerian companies on their list with an equity value of about $5.3 million and $10.7 respectively.
The assumption of some of the reports may have misconstrued this fact believing that the entire $400 million in ETF was only invested in Nigerian equities.
Leaving Nigeria suggests the entire $384 million of the fund’s investment is in Nigeria which is not the case as stated.
The fund invests in several other countries with Dangote Cement being the only major Nigerian company in their portfolio with just 1.3% of the entire fund portfolio.
The Fund, created in September 2012, pools equity together from different frontier markets and smaller emerging markets.
Fund’s decision to liquidate
On June 7, 2024, the Board of Directors of iShares, a subsidiary of BlackRock, approved a proposal to liquidate the iShares Frontier and Select EM ETF (The Fund).
“The Board of Directors of iShares, Inc. voted to close and liquidate the Fund. Currency conversions, including conversion of Nigeria’s currency, the Naira, will impact the timing of the Fund’s liquidation. As a result, the Fund has entered into an extended liquidation period.
During the extended liquidation period, the Fund will not be managed in accordance with its investment objective and policies, as the Fund will sell down its assets, as determined by BlackRock Fund Advisors, where possible and hold the proceeds of such sales in cash and cash equivalents.
It is expected that the Fund will hold a substantial majority of its assets in cash and cash equivalents during the extended liquidation period. After market close no earlier than August 12, 2024, but on a date as soon as practicable, the Fund will cease trading and the creation and redemption of Creation Units.
Currently, the Fund expects the last trading date to be on or around March 31, 2025, and the liquidation date to be three days after the last trading date. The Fund’s website will be updated upon the determination of such dates. For more information, please refer to the prospectus.” iShares, a subsidiary of BlackRock
What this means in a nutshell
- iShares, Inc. has decided to close and liquidate the Fund, with currency conversions affecting the timing.
- The Fund is in an extended liquidation period, during which it will not follow its usual investment objectives and will sell its assets, holding proceeds in cash and cash equivalents.
- The Fund will cease trading and stop creating and redeeming Creation Units after the market closes no earlier than August 12, 2024.
- The last trading date is expected around March 31, 2025, with liquidation three days after.
- The Fund’s website will update with these dates, and more details are available in the prospectus.
About iShares Frontier and Select EM ETF
The Fund was launched on September 12, 2012, with the benchmark being the MSCI Frontier and Emerging Markets Select Index.
- It offers exposure to frontier market equities as well as select emerging market equities, with Vietnam representing the largest portion of its holdings with 28.49%, as of March 31, 2024.
- Kazakhstan accounts for 12.56% of the Fund’s holdings, Romania for 10.52%, Morocco for 5.29%, and Egypt for 5.26%. Additionally, 5.42% of the Fund’s assets are held in cash and cash equivalents.
- Dangote Cement, the only Nigerian equity in the ETF accounts for 1.36% of the holdings.
Commentary
Foreign portfolio transactions on the NGX reached N334 billion between January and April 2024, representing a foreign portfolio participation rate of 17.63%.
This is a significant year-on-year improvement from the 8.62% participation rate during the same period in 2023.
- In April 2024 alone, foreign participation on the NGX surged to 35%, a remarkable increase from the 4.43% recorded in April 2023.
- While the liquidation of the iShares Frontier and Select EM ETF does not pose a threat to the Nigerian stock market, it highlights the challenges associated with high levels of foreign participation in the local bourse.
- This situation reveals the volatility of foreign capital importation into the stock market, noting that substantial inflows can trigger a boom, while significant outflows can lead to a bust.