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I don't get why you think Horiguchi's fights aren't relevant. He has won belts at 125, 135 and has more and better wins than Albazi and he's probably more well known to casual UFC fans than him as well with a more exciting style.Never said that Kyogi is a random unproven guy or anything. But I stand by that it's a bad idea to give a title shot to a guy with no UFC wins in over 7 years, it's just not how UFC does things. And there's no recent precedent for it like I said, if you have to bring up Gilbert Melendez from a lifetime ago you've lost the plot.
The division is definitely in a bad spot though since there isn't a real clear contender, especially since there's no desire to see Royval fight for the title again when he lost to Pantoja less than 3 months ago. It feels a little similar to when to both Strickland & Romero got title shots vs Adesanya when the real #1 contender wasn't available in a way. In the same mold of that I'd still say throwing Albazi in there as the "next man up" makes the most sense given that he's still coming off a win in a main event, (barely a 'win' but whatever) that's still the best option they have out of the available top contenders (I think Albazi would be ready by May, not sure the details of his injury) if they want Pantoja to fight on the Brazil card in May. Maybe he wins it, who knows. Most people didn't think Strickland could pull it off vs Izzy and he got it done.
UFC wants the audience to be familiar with the title challengers performing under the bright lights and importantly under their brand. Telling the casual audience to look up ancient UFC fights from 2017 and earlier or educating them on his successes in other promotions is not how they want to do things.
I very much doubt Albazi is more well known to casuals than Horiguchi is. They also have more highlight material from UFC fights they can use for him compared to Albazi as well.