Five frontier markets reshaping local-currency returns

The investment case is being driven by three reinforcing themes:

At the same time, most frontier FX exposures remain unhedged, largely because of the cost of doing so. This introduces two‑way risks – but in a weaker US dollar environment, the scope for currency appreciation becomes a meaningful component of total return.

Investors can access these markets either through onshore instruments (local bonds) or offshore vehicles, such as credit‑linked notes or supranational bonds that offer local exposure but settle in US dollars. Both routes provide different trade-offs between liquidity, yield and operational ease.

Against this backdrop, we highlight five frontier markets where a single word captures the dominant driver shaping the local‑currency outlook.

Ghana – gold

Ghana has benefited significantly from the sharp rise in gold prices over the past year, with the precious metal up around 60% in 2025. The government has improved the way artisanal and small‑scale gold production is channelled through official systems, increasing both transparency and foreign‑exchange inflows. Combined with a contained fiscal deficit and a recovering external position, these dynamics have helped strengthen confidence in the cedi. Gold remains a key anchor for Ghana’s macro stability heading into 2026.

Nigeria - disinflation 

Inflation in Nigeria is trending lower, with the latest reading surprising on the downside at 15.1% (it peaked at 33.7% in early 2024). While backward‑looking, the disinflation theme is important. With real yields still in double digits, the Central Bank of Nigeria has scope to begin a measured easing cycle, which supports local‑currency bonds. Policy credibility remains essential, but the direction of travel provides a constructive backdrop for domestic assets.

Pakistan - remittances 

Pakistan’s stabilisation story hinges heavily on remittances, which have surged since early 2024. Remittances are the funds sent home by citizens working overseas, which are a vital, stable source of foreign currency that often proves more resilient than exports or portfolio flows. Monthly inflows – in some cases exceeding US$3 billion – have become a vital source of FX and a key support for the rupee.

Pakistan’s upcoming inclusion in a major JP Morgan local‑market index later this year may further attract inflows. Despite improving liquidity characteristics, foreign ownership remains low, leaving room for a re‑rating as participation and sentiment improves.

Zambia – copper

After tumbling at the end of 2023, copper production and prices have rebounded, reinforcing Zambia’s long‑standing correlation between copper strength and kwacha stability. Higher prices likely pushed the current account into surplus by late-2025, while fiscal conditions remained broadly contained. For a commodity‑linked frontier economy, the alignment of stronger copper prices and disinflation could continue to bolster local‑currency performance.

Egypt – FPI (foreign portfolio inflows)

Egypt has experienced substantial foreign portfolio inflows over the past year. That has supported the Egyptian pound, which has been trading within a relatively stable band. With higher real rates, a cautious easing cycle is likely in 2026 as the central bank targets a 4-5% real policy rate (currently 8.1%). Given the country’s twin deficits, the easing path should remain measured – helping retain foreign participation and preserving the local‑market investment case.

Final thoughts…

Frontier local markets remain a highly diverse and rapidly evolving opportunity. What unites these five countries is not a shared macro profile, but the presence of a dominant driver that's powerful enough to shape local‑currency returns: gold, disinflation, remittances, copper and portfolio flows.

For investors, this means local‑currency frontier markets offer differentiated return drivers, improving macro fundamentals and the potential for FX upside in a weaker‑dollar environment – providing exposure to dynamics that are often under‑represented in mainstream emerging-market portfolios.

Source of all stats: Bloomberg, February 2026. For illustrative purposes only. No assumptions regarding future performance should be made.