Nigeria’s Retail Forex Trading Market Growing
The Forex Market has been pivotal to financial markets worldwide for decades now. It pertains around the involvement of trading currencies and determining the daily fluctuations of the market. However, it’s only been recent that large corporations, banking institutions and governments have begun to participate in the market. This made it hard for average investors to trade in the market, until recently.
There is still the individual market for investors and traders, with the easing of regulations and the rise of brokerages; it’s become possible for regular citizens to participate in global trading. However, Europe isn’t the only country that’s seeing incredible growth. The United States, Africa and Australia are three other territories that are having their Forex markets rise dramatically. The trading instruments, platforms and trade options available in these territories have expanded to a point where they act as an ecosystem. Small investors are now capable of participating in the global financial market as a result.
Africa, as a whole, has seen an incredible rise in growth for Forex & FX Trading. However, one country has become a hub where investors are increasingly setting up shop. That country is Nigeria, where an average of three hundred thousand individuals trades monthly.
The Demand Rises
N350-450 Million Naira is the traded daily volume in Nigeria from three hundred thousand traders. The last decade has seen steady increases in sizes, with an average of 25% to 30% growth rate yearly. However, due to global currency exchanges, roughly only $514 is spent by each trader in Nigeria quarterly. This ends out to be the second highest in Africa, right behind the country of South Africa.
There are hundreds of new Nigerian Citizens that become Forex Investors every month. The appeal is that their appeal to choose trades that is in local currencies and derivatives. This allows for more sustainability for domestic financial markets in Africa, and it also provides for Nigerians to establish wealth in their money. However, if these traders want, they can select famous currency pairs like the USD/EUR to trade with high liquidity in mind. This is a high-risk gamble, but the rewards can be substantial. These USD/EUR exchanges in Nigeria are open 24/7 and require an internet connection to access worldwide financial markets.
New Brokerages are Opening
Worldwide brokerages in the FX & Forex Markets have taken notice of the rapid growth in Nigeria. It has prompted many brokerages from Australia, Europe and the United States to build new offices in the country. Opening an office allows for them to invest in the Nigerian Retail FX & Forex Markets.
The appeal for these European, Australian and American brokerages is that the market in Nigeria is primarily based around a young population. These three markets tend to lean to more of a middle-age to elderly demographic, while with Nigeria, the demographic could become life-long traders with their firm. Furthermore, the new regulations implemented by the European Securities and Markets Authority has caused for strict leverage caps on contracts-for-differences, forex instruments and crypto. Nigerian Regulators are liberal towards Forex & FX Trading, which gives brokerages more leeway to maintain their trading services for profit.
Two of the more notable FX Brokerages that have set up shop in Nigeria is Avatrade, Hot Forex & FXTM. The three of them allow for local currencies as payment, with all funds earned for the next year going towards brand awareness and seminars across the country. By educating the population on Forex trading, the likelihood of profit increased tenfold for these brokerages.
Local Regulation Required
Shockingly, there is no local regulation for Forex or FX Trading in Nigeria right now. Operating or trading in the market isn’t illegal. Luckily, two mainstream regulators implement guidelines for the leading brokerages in Nigeria. Those regulators include the Finance South Africa Association and Financial Conduct Authority. However, as a result of there being no local regulator, there are dozens of lesser-known brokerages operating in Nigeria without a license. This has made investors in the country a target for scams.
This is why it’s best to trade with a brokerage that’s licensed from the FCA or FSCA. The policies and guidelines implemented by these governing bodies require the brokerages to operate under safe and reliable business standards. The only downside to using a regulated brokerage is that they need investors to follow strict policies and provide over credentials to confirm legal identification in Nigeria. Creating a Nigerian FX Regulator would guarantee a smoother process for traders in the country.
There is hope in sight for investors in Nigeria. In December 2018, it was suggested that the Nigerian Government was creating the framework required for a national regulator to govern over the Forex & FX Market.