How Nigeria became one of the hottest new forex markets overnight
The forex market sees a daily turnover of more than $5.1 trillion. It is the largest and the
most liquid financial market in the world.
Retail forex trading may only represent a small portion of the global currency market, around 5.5% of the entire volume of the forex market, but this is growing steadily in both popularity and volume in Africa, more specifically in Nigeria.
There are numerous small investors as well as individuals who have the opportunity to trade
in this massive market by using the services and solutions of retail brokers.
Through advances in technology as well as higher internet penetration, increased competition between these brokers, and several other factors, more traders can enter the market without needing substantial amounts of capital says Louis Schoeman from
Forexsuggest.com an African forex news platform.
The development and evolution of digital trading platforms have made the forex market
much more accessible to such traders. This allows them to make both long- and short-term
investments and provides them with ample opportunity for speculation on currency
movements.
What drives growth in forex trading in Nigeria?
The largest daily trading volume of forex in Africa is currently concentrated in Nigeria, followed closely by South Africa, which is the second largest forex market.
Due to Europe and tightened regulations in the retail forex trading arena, along with strict leverage restrictions and limits, brokers have started seeking other opportunities to offer
their services and solutions while reducing operational costs and simultaneously expanding
markets.
These brokers turned towards Africa, amidst other continents, where Nigeria has become
the new hub for regulated European brokers. The CBN is the watchdog in Nigeria which
oversees and regulates these brokers.
Variety of Forex trading options for Nigerian traders
Another reason why there is exponential growth in forex trading in Nigeria can be attributed
to the variety of options that Nigerian traders have.
Currency Derivatives (CDs)
There is a range of instruments, which involve currencies, offered by the Nigerian Stock
Exchange (NSE) which can be used by investors to trade in the forex market.
These instruments are financial contracts of which the value is linked to that of themunderlying asset. Thus, the value of a currency derivative is linked to the value of the
underlying currency, or the basket of currencies that it tracks.
The three main types of derivatives offered by the NSE includes currency futures, currency
options, and currency quanto futures, amidst numerous others.
Spot forex/retail forex
Spot forex is an agreement to purchase or sell one currency against another ‘on the spot’.
The payment and delivery are therefore instant, which is the main difference between
derivatives and spot trades.
When trading spot forex, currency values move in pips, a percent of a percentage change in
value. It is the smallest increment that the price of a currency pair can move either up, or
down.
There are numerous -regulated brokers that offer their services, solutions, and attractive
trading conditions to Nigerian traders.
