By Suleyman A. Ndanusa, PhD, OON
Every generation believes that faster financial markets are better financial markets. From electronic trading platforms and algorithmic execution to instant payments and artificial intelligence, modern finance has become synonymous with speed. Around the world, regulators and market operators continue to modernize trading, clearing and settlement infrastructure in pursuit of greater efficiency, lower risk and enhanced competitiveness. In this race towards modernization, shortening securities settlement cycles from T+2 to T+1 has emerged as the latest global benchmark.
There is little doubt that this evolution represents genuine progress. Faster settlement reduces counterparty risk, improves liquidity management, lowers capital requirements and enables more efficient recycling of financial resources. It reflects the growing sophistication of financial market infrastructure and aligns with the realities of an increasingly digital global economy.
Yet financial markets are not merely technological platforms. They are complex ecosystems comprising regulators, exchanges, clearing houses, central securities depositories, custodians, settlement banks, brokers, institutional investors and payment systems. The effectiveness of a market depends not only on the speed of individual transactions but also on the seamless coordination of these interconnected institutions.
It is here that an important paradox emerges.
A reform designed to remove friction in one part of the financial system may inadvertently create friction elsewhere. A market may become technologically faster while becoming operationally more restrictive. In seeking greater efficiency, policymakers may unintentionally reduce accessibility, particularly for international investors whose investment decisions depend on the smooth interaction of multiple financial infrastructures across jurisdictions.
Recent developments in Nigeria provide a timely illustration of this broader challenge. Following the country’s migration from a T+2 to a T+1 settlement cycle, FTSE Russell announced that Nigeria’s proposed reclassification from an “Unclassified” market to “Frontier Market” status would be placed under further review. The concern was not the adoption of T+1 itself, but whether the shorter settlement cycle could effectively create a de facto prefunding requirement for international institutional investors, thereby introducing operational constraints inconsistent with one of the recognised indicators of market quality.
This distinction is important. The issue is neither an indictment of Nigeria’s economic fundamentals nor a criticism of the country’s commitment to capital market reform. Rather, it demonstrates that successful modernization requires more than technological advancement. It requires careful alignment between innovation, market infrastructure and investor experience.
Indeed, the episode raises a broader policy question that extends well beyond Nigeria. As emerging markets modernize their financial architecture, should success be measured simply by how quickly transactions settle, or by whether markets become simultaneously faster, more accessible, more liquid and more attractive to both domestic and international investors?
Too often, financial reforms are evaluated in isolation. Settlement systems are modernized without sufficient consideration of custody arrangements. Payment infrastructure evolves independently of securities lending. Regulatory reforms are introduced without fully assessing their implications for global investors. The result is that individual components improve while the ecosystem as a whole becomes less efficient.
Modern capital markets should instead be viewed as integrated ecosystems rather than collections of independent institutions. The objective of reform should not merely be technological progress but institutional coherence. Every significant market innovation should be assessed not only for its operational efficiency but also for its impact on liquidity, interoperability, market accessibility and investor confidence.
This has particular relevance for Africa as the continent moves towards deeper financial integration through digital payment systems, regional capital markets and cross-border investment initiatives. Countries seeking to attract international capital must increasingly compete not only on macroeconomic fundamentals but also on the quality of their financial infrastructure. Investors compare markets not simply by expected returns but by the ease, certainty and efficiency with which capital can enter, circulate and exit.
Nigeria has made remarkable progress over the past two decades. Dematerialisation of securities, electronic dividend systems, digital identity infrastructure, fintech innovation and continuous improvements in market regulation have collectively transformed the country’s capital market. The transition to shorter settlement cycles is therefore a logical continuation of this modernization journey. The challenge is to ensure that each successive reform enhances, rather than inadvertently constrains, the market’s global competitiveness.
The lesson is therefore both simple and profound. Modernization is not an end in itself. Nor is speed the sole measure of success. A truly modern capital market is one in which technology strengthens trust, efficiency enhances accessibility, and innovation deepens rather than narrows participation.
The future competitiveness of financial markets will not be determined solely by who settles trades the fastest. It will be determined by who builds the most coherent, interoperable and investor-friendly market ecosystem. That is the real challenge confronting Nigeria and, indeed, many emerging markets in the twenty-first century.
If there is a paradox in capital market modernization, it is this: reforms intended to make markets more efficient can, unless carefully designed, make them less accessible. Resolving that paradox should become one of the defining priorities of contemporary capital market policy.
Suleyman A. Ndanusa, PhD, OON, is an economist, lawyer, strategic studies scholar, and public policy thinker and practitioner with extensive experience in financial markets, regulation, governance, national Security and development
