Foreign exchange has a long history in Nigeria going back to before the establishment of the Central Bank of Nigeria in 1952. Back then foreign exchange was earned by the private sector and was held by commercial banks abroad which acted as agents for local exporters. In 1962, the Exchange Control Act was enacted to bring some control to the market. Since then, the market has seen numerous revolutionary changes in the regulation, control, and growth of players. There are now hundreds of forex brokers that accept Nigerian citizens and operate within this jurisdiction.
In this article, we are going to look at forex brokers in Nigeria and their legitimacy operating in Nigeria. We are going to look at the legal framework that dictates how players in the industry should conduct themselves. We are also going to mention some Nigerian leading forex brokers and see the services they offer and how they conduct themselves.
Is Forex Trading Legal in Nigeria?
Yes, forex trading is completely legal and regulated in Nigeria. In fact, the foreign exchange market has a long history in Nigeria and the country now has grown to be one of the biggest forex markets in Africa. Some estimates put the number of forex traders in the country at over 200,000 forex traders. Let’s look at the regulatory framework governing the forex market in Nigeria.
The Legal Framework For Forex Brokers In Nigeria
In Nigeria, there are two main bodies that are in charge of regulating the financial market’s activities. These two include the Central Bank of Nigeria and the Securities and Exchange Commission of Nigeria. The Central Bank of Nigeria was derived from the Act of Parliament 1958 and is in charge of issuing the country’s legal tender currency and regulating the foreign exchange market, among other things.
On the other hand, the Securities and Exchange Commission of Nigeria was formed in 1962 when an ad hoc consultative and advisory body was established under the aegis of the Central Bank of Nigeria. The body was under the name Capital Issues Committee. The Committee was in charge of examining applications from companies seeking to raise capital from the capital market and recommending the timing of such issues.
Together, the CBN and the SEC Nigeria are in charge of overseeing the financial market and establishing rules and regulations for participants to follow. These two bodies are in charge of issuing operating licenses to forex brokers that meet the necessary requirements. However, there is no broker that is currently licensed by any of these two bodies. At the moment, the CBN and the SEC Nigeria allow online forex brokers to operate within the jurisdiction without local licensing.
As such, the best bet for Nigerian traders is to trade with brokers with licensing from other jurisdictions in the world. Some of the best licenses Nigerian traders should look out for include those from the FSCA in South Africa, the CMA in Kenya, the FCA in the UK, the CySEC in Cyprus, and the ASIC in Australia. These regulators have an established history of ensuring brokers provide fair trading environments for their clients.
How To Verify a Broker Is Legitimate
Unfortunately, there are many brokers in the market that will present fake licenses in order to attract customers. As such, most regulatory bodies provide a means for traders to look up a company’s license to ensure it is legitimate. The FSCA maintains a summative list of all licensed entities that traders can look up and verify licenses. The FSCA’s List of Regulated Entities and Persons contains different types of institutions including over-the-counter derivatives providers. The Capital Markets Authority of Kenya follows the same game plan and provides a list of CMA Licensed market players.
On the other hand, the FCA and the CySEC have portals where individuals can search for a company by name or license number to check their regulatory status. For companies that present FCA licenses, traders can visit the FCA’s online register and check whether a company is listed or not. Similarly, the CySEC has a list of all CySEC regulated companies and traders can search to verify the legitimacy of a company’s regulations.
The regulatory status of a company is the most important feature to look at in a forex broker. However, regulations alone are not enough. The broker a trader chooses should also have a demonstrable track record of following the financial laws of the jurisdictions it operates in. Besides, there are other features that traders should consider before choosing a broker to trade with. These include the trading fees, the availability of assets, and the trading platform a broker provides. The broker should offer reasonably low fees, give access to a variety of global markets, and offer world-class trading platforms. Of course, traders consider other features specific to their needs such as fast withdrawal times.
Here are some forex brokers that operate in Nigeria and how they are regulated.
Exness
Exness is regulated by two regulatory commissions in Africa, alongside other top-tier regulators from around the world. Specifically, this broker is under the supervision and regulation of the CMA in Kenya, the FSCA in South Africa, the FCA in the UK, and the CySEC in Cyprus, among others. This regulatory status is one of the reasons why we believe that Exness is a great choice for Nigerian traders. It provides traders with just over 200 tradable assets including CFDs in forex, indices, cryptocurrencies, energies, and stocks. The fees for trading on this broker site are from as low as 0.0 with a commission of $3 per side per lot paid. For a trading platform, clients can choose between MT4, MT5, or WebTerminal.
XM
XM is another reputable broker that accepts Nigerian clients. This broker is under the regulation of world-class regulators including the FCA, the CySEC, and the ASIC. It offers traders CFDs on forex, indices, cryptocurrencies, stocks, shares, precious metals, and energies. The trading platforms available to choose from include MT4, MT5, and the XM Trading App. The spreads on this broker site are relatively low starting at 0.6 pips on its XM Ultra Low account.
Pepperstone
In Africa, Pepperstone is regulated by the CMA in Kenya. On top of that, the broker has regulations from several other trusted regulators from around the world. These include the FCA in the UK, the CySEC in Cyprus, the ASIC in Australia, and the BaFin in Germany. It offers traders over 1,200 trading instruments that include CFDs on forex, cryptocurrencies, indices, commodities, shares, and ETFs. The fees for trading on this broker site can go as low as 0.0 pips with a commission of $3.5 per side per lot paid. Further, traders can choose MT4, MT5, cTrader, or TradingView.
FP Markets
FP Markets offers its clients one of the deepest collections of market instruments, totalling over 10,000 different assets. This broker allows investors to trade CFDs on shares, metals, commodities, indices, cryptocurrencies, bonds, and ETFs alongside forex currency pairs. These assets are traded on four main world-class platforms that include MT4, MT5, IRESS, and cTrader. In terms of regulations, the is regulated by the FSCA based in South Africa alongside other top regulators from around the world. These include the CySEC in Cyprus and the ASIC in Australia. The fees charged can go as low as 0.0 pips with a commission of $3 per side per lot paid.
XTB
This broker is under the regulation of the FSCA, the CySEC, and the ASIC. In total, there are over 1,500 trading instruments from different asset groups on the XTB broker site. Traders get access to instruments from the forex, indices, commodities, equities, cryptocurrencies, and ETF markets. To trade these instruments, clients have access to the company’s in-house-built trading platform, xStation 5. The trading fees on XTB are also attractive. There is only one trading account offered by this broker with spreads from as low as 0.5 pips for major currency pairs.
Closing Remarks
Evidently, the CBN and the SEC Nigeria have a lot of work to do to set up a legal operating framework for forex brokers in Nigeria. At the moment, Nigerian traders have to rely on regulations from other countries. While there are plenty of forex brokers with reliable regulations, it is much better to have a local regulator that would guarantee traders’ protection. Moreover, forex brokers in the country would have clear guidelines on how to conduct themselves within the jurisdiction.
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