BlackRock, one of the world’s leading asset managers, has announced plans to liquidate its iShares exchange-traded funds (ETFs) valued at $400 million, citing unprofitable business conditions in Nigeria and Kenya.
The primary issue prompting this decision is the difficulty of currency repatriation, compounded by the recent devaluation of Nigeria’s naira.
The iShares Frontiers fund, which has invested heavily in emerging market equities in Nigeria and Kenya over the years, will see its final trading day on March 31, 2025, marking the anticipated conclusion of an extended liquidation process. This decision follows a proposal approved by the fund’s board of directors, who determined that the persistent liquidity challenges in frontier markets made liquidation the most viable option.
Tekedia Mini-MBA edition 16 (Feb 10 – May 3, 2025) opens registrations; register today for early bird discounts.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
“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,” iShares stated.
The extended liquidation period is a direct result of the significant impact of converting Nigeria’s naira, which complicates the liquidation process. iShares highlighted the unpredictability of currency conversions as a key factor influencing the timing of the fund’s closure.
“Currency conversions, including conversion of Nigeria’s currency, the naira, will impact the timing of the fund’s liquidation. As a result, the fund will enter into an extended liquidation period,” the company stated.
The fund will cease trading and the creation and redemption of creation units will halt after market close no earlier than August 12, 2024.
Recent Divestments
Ahead of the full liquidation, BlackRock has already divested $5.2 million of its holdings in Kenyan companies. This includes shares in Safaricom ($2.8 million), Equity Group ($1.5 million), and KCB Group ($885,000), all listed on the Nairobi Securities Exchange (NSE).
Adding to the growing list of companies exiting Nigeria
BlackRock’s planned exit from Nigeria marks another setback for the country’s economic landscape under President Bola Tinubu’s administration, which is currently struggling with declining economic fortunes. The move by BlackRock follows similar actions by other multinational companies facing challenging business environments in Nigeria.
The withdrawal of BlackRock adds to a growing list of multinational companies that have exited Nigeria in recent years. Prominent examples include Diageo, the parent company of the Guinness brand, which announced its decision to sell its controlling shares to Tolaram after recording a loss of over N61 billion in the financial year ending March 31.
Additionally, UK pharmaceutical giant GlaxoSmithKline shut down its Nigerian operations, citing an unsustainable business environment. Tech giant Microsoft also announced its exit from Nigeria, following persistent economic challenges and an unfavorable business climate. Other companies like South African retail giant Shoprite, Truworths, and fashion retailer Mr. Price have also pulled out of Nigeria, citing currency fluctuations, import restrictions, and complex business conditions.
Economic Downturn Since 2015
The economic challenges in Nigeria can be traced back to the administration of President Muhammadu Buhari, which began in 2015. Under Buhari’s leadership, the Nigerian economy suffered from several issues. The economy entered a recession in 2016, the first in 25 years, driven by falling oil prices and a lack of economic diversification. Persistent foreign exchange shortages made it difficult for businesses to import goods and repatriate profits. Inflation surged, eroding consumer spending power and leading to a rising cost of living.
Tinubu’s Policies Compounding Issues
President Bola Tinubu’s administration has implemented policies that further compound these economic issues. The removal of fuel subsidies led to a significant increase in fuel prices, exacerbating inflation.
The unification of exchange rates resulted in a sharp depreciation of the naira, increasing costs for businesses and consumers. In response to rising inflation, the Central Bank of Nigeria (CBN) has aggressively raised interest rates, making borrowing more expensive and stifling investment.
Against this backdrop, inflation has significantly eroded the spending power of Nigerian consumers, crippling economic activities and making it difficult for companies to thrive. The annual inflation rate hit 33.69% in April 2024, up from 29.90% in January, marking the highest level in 28 years. Food inflation soared to 40.53%, putting immense pressure on household budgets and reducing disposable income.