Moving From Caveat Emptor To Regulation – Nigeria’s Online Retail Forex Trading Market

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Thursday, November 1, 2018    02. 55PM  / By TheAnalyst


Forex (FX, foreign exchange, or currency trading), is a decentralized global market where all the world's currencies trade. The forex market is the largest, most liquid market in the world with an average daily trading volume exceeding $5 trillion.


To put things into perspective however, almost ninety per cent (90%) of the global volume is done by the banks; trading Forex. The retail market is the remaining ten per cent (10%).


The average daily trading volume in Nigeria is is roughly $10-$15m daily. This figures excludes what is done by banks.


That said, the market globally relies heavily on experienced traders, brokers and trainers that help guide traders to success. A critical aspect of this industry is the emphasis on risk management and profit/loss management.


In this short article, we draw attention to the upsurge in market activity i in leveraged online retail Forex trading; with unregulated actors increasingly becoming more visible and stories of investment (trading losses).


This open engagement with the market must have informed the Securities & Exchange Commissions’ public notice on Friday, October 19, 2018 wherein it stated that:

online retail Forex trading is currently unregulated and consequently may be subject to abuse.


SEC added that “until a framework for regulation of online retail forex trading is developed by the SEC, any person participating or engaged in such investment activity does so at his or her own risk.”


The question must now be properly focused to enquire from the regulators - what happens beyond a caveat emptor about a market/entity operating for some years, duly registered by the CAC, pays taxes and conducts its business (for the most part) in the open?


Is it not about time that regulation catches up to market realities; and leverages on the work done by stakeholders thus far or set direction for a means-tested guidance for the market?





For a country with a high usage of forex and a whole ecosystem around forex, it would be a stretch not to expect a market to evolve around the business of currency trading. While we have the banks and the BDC’s handling physical transactions, the trading in currency; largely done via online is a natural progression and the regulators need to act appropriately.


For a market that started around the tail end of the financial market boom era 2006/7, the sector has evolved and bears the following characteristics worthy for a regulator to bear cognizance of:

  • Professional Personnel /Broker Community – There are a number of global forex trading firms that have established local presence in Nigeria, along with locally created entities.
  • Capacity Building – The sector has a whole suite of training and knowledge development programs around technical trading aspects as well as train-the-trainer courses. The focus has been largely around the transaction end and little is known about other aspects such as – Business management, risk management, approved fee structure, BVN adoption, investor protection, contracts, accreditation/approval of training modules, investment advisory ethos and corporate governance.
  • Trading Techniques and Strategies - are ubiquitous and available for traders at a cost; even as new opportunities open up for experts to work with coders to deploy machine learning and AI for customized local solutions.
  • Service Dynamism – New product development is possible as these new players are able to customize solutions to meet some needs of the market including speed of service.
  • Information/News Compliment – The sector benefits from a real time stream of information from multiple sources, including daily news updates and analysis from brokers, news platforms and FX trading engines; without prejudice. Proshare produces a dedicated ONLINE TRADING PORTAL Ranking Report, issuing its third (3rd) annual report in August 2018.
  • Technology – The sector has benefitted from the advancement and adoption of technology (internet, handsets and software) in Nigeria to enable smart trading from all devices.  There are on-going engagements with tech giants, technology enablers and telco companies in Nigeria on expanding reach, usage and service delivery.
  • An Ecosystem – of trainers, traders, partners, representatives, media, auditors, tax professionals, code analysts, consultants, market analysts, advertisers, marketers, sales agents, operations officers, security, signal service providers, researchers, academics and others have emerged.


The missing group in the alst category must be the regulators for which the current interest by the SEC and CBN should deliver on.


Yet some issues remain.


How much money is needed to Day-Trade Forex?


While Forex trading has been seen to make people rich, the proven examples have been evident mostly with hedge funds with deep pockets or an unusually skilled currency trader (with deep pockets).


People do lose money trading currencies. Indeed, at least one in five people would lose money.


The rule for efficient day forex trading requires prospective traders to open an online account with at least $2000 (or preferably $5000) if the goal is to earn a decent income stream. With a $3000 account, and risking no more than 1% of your account on each trade ($30 or less), you can make $60+ per day.


In Nigeria currently, entry levels for deposits have ostensibly been reduced to accommodate the economic realities of the retail target investor/trader; with some starting with as low as $100 or the naira equivalent. There is not much that can be achieved here beyond a tryo phase (learning).


Alpari, for example advices “on the domain account, you are not investing real money, you are using the visual money to trade but when you feel you are confident enough, you can then start as low as N1,000 or any amount. You are using a none account because when you make a deposit in naira, we are converting your naira to the US dollar so that you can have access to the international forex market, which will enable you to trade. And here, you can start with as low as N1,000.”


How to start trading forex?

1.       Now you have an online trading account and have deposited funds, you can start trading.

2.     Log in, choose whether to trade Forex through spread betting, CFDs or spot FX, pick your pairs and open a position.

3.      You can access live price feeds, streaming charts and news instantly and trade 24-hours a day.



Proshare Nigeria Pvt. Ltd.



Forex Trading Landscape in Nigeria


Forex trading is Nigeria is now seen by the public as one of the investment avenues for making many, popularized by several brokers promising massive returns with minimal investments (sigh!)


With an increasing number of broker scams and financial malpractices, along with the risky nature of Forex trading, still, no guidance exists around how the public can engage in the online Forex markets.


List of FX Brokers Operating in Nigeria

 1.       HotForex

2.      Uniglobe Markets

3.      FXTM

4.      FXOpen

5.       Alpari Limited

6.      InstaForex

7.       RallyTrade

8.      ACM Brokers

9.      Eagle Global Markets

10.  Forex Brokers AZ

11.    XM

12.   XTrade

13.   FxPro

14.   FXCM


Pertinent issues for the regulators attention 


First must be who, if needed, approves (licenses) companies engaged in currency trading, including the directors and management team? It is always a good starting point to establish the corporate governance ethos of an industry as a building point for the regulatory framework.


Second, how do we harmonise the central bank regulations on forex and the practice in the industry? It is trite knowledge that Nigerian Forex traders indulge in currency pairs (what is not known is whether do they involve Naira as the base currency or not).


Given that the Nigerian Naira is the official currency; it is illegal for Nigerian citizens to transact in any other currencies while in Nigeria, and It is also illegal for the citizens to send Naira overseas for the purposes of currency conversions or investments unless approved by the Central Bank of Nigeria; why is the conversion of the NGN to USD or other currencies for the sake of trading the FX markets with overseas Forex brokers allowed?


This is fundamental to the entire practice and while sanctions has been the usual regulatory approach till now; the SEC has a unique opportunity to actually lead the market towards a risk-based supervisory model that promotes and incetivises compliance with the monetary objectives of government in formulating its guidance regulations in this area.


Currently, there are no restrictions on the maximum available leverage, types of trading, and the rules governing exotic currency pairs offered by various Forex traders in Nigeria.


At present, forex trading is a private activity in Nigeria that is exclusively made available to the Central Bank of Nigeria, other allied banks, and large financial institutions.


Recall that a few years back, a body called the Association of Online Forex Trading Agents, was formed to regulate online forex brokerage firms in Nigeria, but at present site has no content.



Caveat Emptor - Broker Scams


In the current scenario, many international Forex brokers in Nigeria operate through branch offices, introduced/referral brokers, or through affiliates without these ‘professionals’ actually being regulated by the SEC or any other regulator directly. 


These brokers offer their services illegally without any consent from the authorities, which prevent the Regulators from tracking their activities (or so it seems).


As stated earlier, a public notice on the activities of some unscrupulous persons may be a minimum, it is not sufficient to meet the SEC’s market protection and development mandate.


It needs to do more.


A majority of traders typically lose their money in the markets due to a lack of knowledge and are susceptible to scams and fraudulent activities owing to the mixed signals from the authorities.


If on the one side, SEC is warning retail investors on Forex Trading but on the other side, forex trader are making presentations and being hosted by self-regulatory bodies such as the NSE; it would do well for the market that we clear the air.


Regulation lags being the markets, and this is another proof of that; yet one that offers an opportunity for an engagement between the SEC, SRO’s and credible players in the market to work on and produce an exposure draft for the market. This is long overdue.


It is the right thing to do,



Most Recent Regulatory Guidance

1.       The List of 882 CBN-Licensed Microfinance Banks in Nigeria As At Sept 30, 2018

2.      CBN Releases Code of Corporate Governance for Finance Companies in Nigeria

3.      CBN Releases Code of Corporate Governance for Development Finance Institutions in Nigeria

4.      CBN Releases Code of Corporate Governance for Microfinance Banks in Nigeria

5.      CBN Releases Code of Corporate Governance For Bureaux De Change In Nigeria

6.      The Approved List of 34 CBN-Licensed Primary Mortgage Banks In Nigeria As At Sept 30, 2018

7.      CBN Introduces Additional Template to The Redesigned CRMS

8.     CBN Reviews Minimum Capital Requirement For Microfinance Banks In Nigeria

9.      Nigeria Releases New Executive order to Combat Money Laundering and Tax Evasion



Proshare Nigeria Pvt. Ltd.



The Nigerian ONLINE Retail Trading Ranking Reports

1.        Nigerian Online Trading Portals Ranking Report 2018

2.      It is Time for Proshare’s H1 2018 Online Trading Ranking Survey

3.      Nigerian Capital Market and FX Online Trading Portals Ranking Report H2 2017

4.      The Nigerian Capital Market Online Trading Portals Ranking Report

5.       The Nigerian Online Trading Report


Proshare Nigeria Pvt. Ltd.



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7.       VIDEO: How EGM Platforms are enabling Forex trading for Nigerians

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9.      Proshare Unveils 2018 Trading Portals Ranking Report - Independent, Sept 2018



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