The Nigerian market has always been lucrative to businesses, which would explain the many foreign investments into the country. Part of these investments have lately been made by Forex brokers seeking to expand their customer base. Both the naira’s relevance in the international Forex market and favourable foreign investment policies make the country very attractive to FX brokers. Nigeria has so far managed to draw several Forex brokers already who have thrived in the country, but not all of them have been the best Nigerian FX brokers. Inasmuch as there are some very good brokers in Nigeria, there have also been some bad apples who have perpetrated some nasty Forex scams, leading to millions in losses. This is why, in this post, we’re going to look at what makes the top Nigerian Forex brokers so that you can choose wisely when you need to.
There are a lot of things one needs to consider about a Forex broker before they start to work with them. Many of these have some importance to the general everyday trading experience, but there are some very crucial aspects to be considered. The latter considerations are more important because they can be the difference between a long-term, profitable partnership, or a series of losses ending up with your being broke. The most important factor has to do with financial regulation. Every Forex broker operating in Nigeria has to be licensed by the Central Bank of Nigeria (CBN) before they can sign up Nigerian clients. Therefore, only CBN regulated Forex brokers should be considered as it not only provides a measure of fund security but also shows that the company is willing to abide by the law.
Besides regulation by the CBN, another important factor has to do with account currency. We know that most Forex brokers will present your account balance in US dollars, which is a good option since most currency trades are based on the US dollar. Nevertheless, you may want to have an account based on your local currency, in this case, the naira. Having an account based on your local currency has several benefits, but most of all it protects you from rapid shifts in exchange rates. Imagine if you had to convert your account’s US dollars into naira, and just then the strength of the US dollar rose sharply. You would end up with less naira than you had expected. Fortunately, the top Nigerian FX brokers will provide naira-based accounts specifically for Nigerian citizens. By allowing deposits and withdrawals in naira, you are less exposed to currency fluctuations and can better plan your finances.
There are at least a dozen FX brokers operating in Nigeria today, yet not all of them make the list of trusted Forex brokers in Nigeria. To identify the best brokers in Nigeria, they first need to be licensed by the CBN and preferably have a local office. According to this criteria, the following brokers could be considered ideal partners:
MT4, MT5, WebTrader
Rolling Swap, Contest
Nevertheless, there are still other Forex brokers not directly licensed by the CBN, but who still offer great service. A look at some of the Nigeria Forex broker reviews will show that there are quite a few such brokers whom other Nigerians have worked with successfully. However, it is still not recommended to work with a locally unregulated broker, even if they have been licensed elsewhere. While it may not be completely illegal to do so, there are certain downsides to dealing with such companies. Many of them still try to solicit clients from Nigeria through online advertisements, and their offers can be very enticing, but don’t quickly fall for them.
The main reason for this is funds security, where a CBN regulated FX broker will be held accountable for your funds’ security. These rules were set forth in the Banks and Other Financial Institutions Act (BOFIA) of 2007. The Central Bank of Nigeria operates under the guidelines in BOFIA in its role of regulating, among other financial institutions, Forex brokers. All licensed Forex brokers need to have a segregated account for their clients’ funds, and not put them in the same account as the company’s. This keeps client funds separate from the company’s expenses, while also protecting the funds from legal actions such as fines or bankruptcy.
Even in the worst case scenario, you can be assured that your funds are safe. Consider what happened to several major FX brokers in 2015 after the Swiss National Bank (SNB) removed the Swiss franc’s peg to the euro. The move led to massive losses on even the world’s largest FX brokers like FXCM and Alpari UK who both filed for bankruptcy. Even so, the regulations in both the UK and US kept their clients’ funds secure and they only suffered losses from the trades themselves, but not the bankruptcy filing. On the CBN regulated Forex brokers list, you will find the names of the most commendable FX brokers based in Nigeria to trade with.
Even though the CBN is responsible for licensing FX brokers in Nigeria, there are still no clear rules regarding retail FX trading. It is quite an alarming situation considering how many Nigerians participate in this market. In a 2005 article by Finance Magnates, they reported there were over 500,000 traders in the industry. Since then, you can bet that the number has only continued to rise exponentially especially in the wake of economic uncertainty. Perhaps the largest Forex brokers in Nigeria may have hundreds of thousands of clients in their books. Despite the lack of regulations, there are still good reasons to work with a broker licensed by the CBN. The first has already been mentioned in the previous section – fund security.
Besides, there is another reason why the best Nigerian FX broker will be licensed and based in Nigeria. On the 23rd of April 2015, the CBN imposed a cap on the amount that could be spent using debit and credit cards for overseas transactions. Prior to this, the limit had been set at $150,000, but after the announcement, the new limit was lowered to $50,000 per person per year. This daily limit still stands to date. Furthermore, cash withdrawals were limited to $300 per person per day.
For someone dealing with an offshore Forex broker, this limit can be very restrictive especially if you are a high net-worth investor. However, the limit does not apply to local transactions, which means you can transact a lot more than $50,000 if you needed to without any problem. This is another reason why you may want to choose a CBN regulated Forex broker for your Forex trading.
Of late, there has been a push by the best Nigerian CFD brokers to create targeted regulations and bring the industry to the fore. The Association of Online Forex Trading Agents is a group of online-only Forex brokers operating in Nigeria who are seeking to gain acceptance in Nigeria. Their intent is to try and recreate the online retail Forex market as a viable investment not only to individuals, but to institutional investors as well.
A high occurrence of Nigeria Forex scams has cast a bad light on the industry recently, but the group hopes to clean up the image of the Forex market among the Nigerian people. So far, they seem to be making a few steps, as already they had been invited to a meeting with some CBN members as well as those from the US Securities and Exchange Commission (SEC). The inclusion of the SEC in the joint meeting further goes to represent the position of the naira in the global Forex market and the need to bring the country’s residents to the fold.
There is now a new avenue for Forex brokers in Nigeria as well, brought about by the increasing popularity of bitcoin in the country. In fact, Nigeria’s bitcoin trading volume has become the second largest in Africa behind Zimbabwe’s. There was a record high transaction of bitcoin that Nigeria became the 23rd largest bitcoin market worldwide this December. This has been a great opportunity for CBN cryptocurrency brokers who also allow speculators to trade and profit from bitcoin and other cryptocurrencies especially through the use of leverage.
Despite increasing knowledge by the public about Forex scams, they still continue to happen due to ignorance by investors who can’t spot the best Nigerian Forex broker. One of the most recent scams this year was perpetrated by a 36-year-old woman who managed to collect N700 million ($2 million). She had posed as an agent to offshore Forex brokers when she didn’t have any such role. After the investors had deposited the money, the monies were deposited into two domiciliary accounts – Reoworld Enterprises and Willyrich International Business Services. Afterwards, the funds were transferred to other accounts and she had fled to Ghana.
Through the collaborative efforts of the Ghanaian police and Nigeria’s Police Special Fraud Unit (PSFU), they were able to arrest her. However, it is uncertain whether the funds can be recovered since they were transferred to several other accounts. This is not the first Forex scam in Nigeria, nor will it be the last. The worst part is that these scams are done even by major financial institutions like banks. Just this year in April, the Senate admitted that N30 trillion($83 billion) had been lost through Forex scams performed by the banks themselves!
To identify the top Nigerian Forex broker, you will need to heed all the lessons expressed in this post diligently. Otherwise, you may find yourself in a situation you never wanted to be in when you first considered Forex trading. Despite some of the negatives of Forex trading in Nigeria, do not feel discouraged because it can still be very profitable if only you are careful.
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