In the last couple of years, the online trading industry in Nigeria has experienced exponential growth. In turn, this has resulted in one of the leading and healthiest investment and trading markets in all of Africa.
There are several reasons for this, including better internet connections, stricter regulation, and a growing number of available brokers.
However, due to the risk associated with trading, people understand how the market works as well as what services that can be trusted before they get started. Therefore, we’ve done a deep-dive into online trading in Nigeria and collected the results in the following article.
Nigerian Trading Laws
The number one thing to consider before trading in Nigeria are the laws regulating the market. Since Nigeria has had its own stock exchange – the NSE – since the 1970s, trading laws is nothing new in the country.
That being said, online trading is not regulated in the same matter as the stock exchange, which is regulated by the Securities and Exchange Commission. Instead, online trading is overseen by several smaller regulatory bodies.
The job of regulating online brokers in the country falls on the Central Bank of Nigeria (CBN), under the Foreign Exchange act of 1995 . Although, the CBN does not issue broker licenses that are internationally accepted as trustworthy.
Instead, people looking for a broker should rely on the licenses issued by the world’s top regulatory bodies, such as the Financial Conduct Authority (FCA) in the UK, the Cyprus Securities and Exchange Commission (CySEC) in the EU as well as the Financial Sector Conduct Authority (FSCA) in South Africa.
In other words, the only online brokers that can be trusted in Nigeria should have been issued a license by one or more of the above-mentioned regulatory bodies, which brings us to the next point.
Online Brokers and Trading Platforms in Nigeria
There is currently a range of internationally acclaimed brokers operating in Nigeria and they offer access to a range of different markets, including forex, stocks, commodities, and cryptocurrencies. However, as described in detail in this guide to the best forex broker in Nigeria, most assets are provided as speculative derivatives such as Contract for Difference (CFD).
There are many benefits to trading CFDs, for example, it allows you to speculate and profit of stocks and other securities that you wouldn’t otherwise afford to invest in. It also provides the option of using leverage and margin to improve the exposure of each position. More importantly, CFDs make it much easier and more available to switch between long and short trades than when using more traditional brokers.
How Did Online Trading Become So Popular in Nigeria?
Now let’s take a look at some of the reasons as to why online trading experiences such impressive growth in the region over the last couple of years.
According to most experts, there are two main reasons as to how this happened.
First and foremost, an increased, nationwide economic stability has resulted in more Nigerians being able to afford investments and trading than ever before. Naturally, economic freedom is essential to any financial market’s existence, and we can expect the online trading industry to continue growing as the country’s economy strengthens further.
Secondly, only a few years ago, most trading platforms where only available on desktops, making them rather unavailable in a country like Nigeria, which is a predominantly mobile device-driven society. But thanks to the recent rise of incredible mobile trading platforms, many of the world’s top brokers have effectively become available to Nigerian traders.
While trading can be both highly exciting and potentially profitable, it’s also associated with certain risks. Therefore, it’s important that you only rely on trustworthy and regulated brokers when trading and that you spend the time needed to learn the basic skills of trading. If you don’t know how to analyze a market or use the platforms provided, your chances of making profit are next to none.
Luckily, all the regulated brokers that are currently operating in Nigeria offers educational material that can help you get started, even as a complete beginner.
In addition, these brokers offer demo accounts where you can trade using virtual money, thus eliminating all risk and allowing you to practice before risking your own hard-earned money.