BlackRock, one of the world’s leading asset managers, has announced its decision to liquidate its iShares exchange-traded funds (ETFs) valued at $400 million in Nigeria and Kenya. This decision comes amidst an unprofitable business environment exacerbated by challenges in currency repatriation and the significant devaluation of the naira.
BlackRock’s iShares Frontiers, which has invested substantial amounts in emerging market equities in Nigeria and Kenya, is set to cease trading by March 31, 2025. The extended liquidation period is due to the complex nature of currency conversions, particularly the naira, which poses a significant challenge in the timely liquidation of the fund.
“The board of directors of the company approved a proposal to liquidate the fund. In light of persistent liquidity challenges in certain frontier markets, including among other things, delays or limits on repatriation of local currency, the board determined that it is in the best interest of the fund and its shareholders for the fund to liquidate,” stated iShares in a recent announcement.
The devaluation of the naira and liquidity constraints have made it difficult for BlackRock to repatriate profits, impacting the timing and process of the fund’s liquidation. These issues have prompted the company to opt for an extended liquidation period, with the final cessation of trading scheduled for no earlier than August 12, 2024.
The planned exit of BlackRock’s iShares marks another significant setback for Nigeria’s economic landscape, reflecting the ongoing challenges faced by the country’s business environment. This move adds to the list of multinational companies exiting Nigeria amid economic difficulties.Guinness Leaves Nigeria After 75 Years as Tinubu’s inflation wreaks economic havoc
Already, BlackRock has liquidated $5.2 million of its shares in Kenyan companies like Safaricom ($2.8 million), Equity Group ($1.5 million), and KCB Group ($885,000), which are listed on the Nairobi Securities Exchange (NSE).
The departure of such a significant player in the financial market underscores the deteriorating business conditions in Nigeria. This development comes as President Bola Tinubu’s administration, which is just over a year old, struggles with the nation’s declining economic fortunes.
The economic outlook for Nigeria has been grim, with several high-profile multinational companies deciding to exit or scale down their operations. Diageo, the parent company of Guinness Nigeria, recently announced the sale of its controlling shares to Tolaram after posting a loss of over ₦61 billion for the financial year ending March 31. Similarly, UK pharmaceutical giant GlaxoSmithKline and tech behemoth Microsoft have also ceased their operations in Nigeria.
BlackRock’s decision to liquidate its iShares ETFs in Nigeria and Kenya highlights the severe challenges faced by businesses operating in these frontier markets. Currency devaluation, liquidity issues, and difficulties in repatriating profits have created an untenable situation for many international investors. As Nigeria grapples with these economic challenges, the government will need to address these fundamental issues to restore confidence and attract foreign investment. The exit of major multinational companies not only impacts the market but also signals the urgent need for economic reforms to stabilize the business environment and encourage investment.