If you have an interest in trading Forex in Nigeria, you should first know that you are trading at your own risk because there is no locally regulated platforms & no regulation for forex trading.
However, there are forex brokers regulated outside in other countries such as United Kingdom, South Africa, and even Kenya that accept Nigerian traders. It is usually advised that you trade only via brokers that are licensed with multiple Tier-1 regulations like FCA, ASIC, FSCA, CySEC.
Foreign regulated brokers have their trading platforms & apps available online to download for traders and use even if they are not physically present in Nigeria
Comparison of Forex Brokers in Nigeria
Several oversea located forex brokers are willing to accept Nigerian clients, and they all have varying trading conditions and offerings as seen in the table below.
|Forex Broker||Regulated by||Naira Account||Min Deposit||Max. Commission per side||What you can Trade|
|Exness||FSC BVI, FSCM, FSA, CMA, CySEC, FCA, CBCSM, FSCA||Yes||10 USD||3.5 USD per side||Forex, CFDs on stocks, indices, commodities, crypto|
|FxPro||FCA, FSCA||No||$10||3.5 USD||Forex, CFDs on Indices, Stocls, Metals, US Stocks|
|HF Markets||FCA, DFSA, FSCA, FSA, CMA||Yes||Zero||3.5 USD||Forex, CFDs on Indices, stocks, Bonds, ETFs, crypto|
|FXTM||CySEC, CMA, FCA, FSCA||Yes||N10,000, or 10 USD||2 USD||Forex, CFDs on commodities, stocks, indices|
|OctaFX||CySEC||No||N15,000||Zero||Forex, CFDs on stocks, indices, commodities|
|Tickmill||FSCA, Labuan FSA, FSCA, CySEC FCA||No||100 USD||2 USD per side||Forex, stocks, indices, Bonds, commodities, crypto|
How to Start Forex trading in Nigeria
1) Get a good device & a stable internet connection
You can trade forex on a desktop computer, web browser (no app installation needed), or on your smartphone which is very common today due to the convenience.
Today the smartphone has gone from a basic device for receiving calls, to a utility device as everybody is thinking of how to make money with a smartphone in Nigeria. This has drawn many to trade forex on their smartphones.
The best smartphone for trading should have a big screen (at least6 inch), AMOLED display, octa-core processor, & large RAM size (around 6 GB)
There is also a need for speed. When you have a slow internet connection, it can delay your order execution speed, putting you at risk of slippage.
Slippage is the difference between the price at which you choose to execute a trade, and the price at which it is actually executed. It’s something you can avoid by getting a device with a fast internet connection.
If you are the type of trader who trades small volumes and does not use advanced trading strategies, then a network speed of 1 Mbps may be enough for trading Forex.
However, traders who trade large volumes with advanced market strategies will need a network speed of at least 10 Mbps.
2) Register & Open an account with a regulated Forex Broker;
The process of opening an account with a forex broker is similar to bank account opening in Nigeria. You can open an individual account, joint account, or corporate account.
The above is an example screenshot of the account opening form at HFM, where in the first step you are required to fill in the basic details.
Also read legal documents at the bottom of the broker’s website, to find out what rights you have & do not have when trading with the broker. Legal documents also tell you what the broker can do without your consent.
Here is a list of some basic information that will be required:
- BVN Number
- NIN number
- Passport photo
- NEPA/PHCN/Power bill/Water bill etc.( the most recent one of the last 3 months)
- CAC certificate (for corporate accounts)
To begin the account opening process, you will have to download the broker’s trading app, or open an account from the broker’s website. All documents listed above will be scanned and softcopy uploaded to the broker’s app or website.
3) Fund your Trading account
To understand how much it costs to trade forex in Nigeria, you should compare the different funding options presented by the broker such as local bank transfers, mobile money, eWallets, and crypto.
Each payment option has its specifications such as speed, minimum deposit and withdrawal amounts etc. Some payment channels attract fees either from the broker, or from the payment provider.
Also if the broker you have chosen does not have a naira account, or you decide not to set your account base currency to naira, you will have to deal with currency conversion fees.
Study the deposit and withdrawal methods and choose the one that suits your circumstances.
4) Pick a Currency Pair or Instrument to trade
In the forex market, currencies of countries are paired against each other to form a currency pair.
For example United States Dollar (USD) paired with the Nigerian Naira (NGN) gives rise to the USD/NGN pair.
Deciding on a forex pair to trade depends on several factors but liquidity and trading strategy are major considerations.
When you pair the USD with the currency of another developed economy like the Euro, a major currency pair is formed (EUR/USD).
Major pairs have higher liquidity (many buyers & sellers), and low volatility (stable price fluctuations) and this results in tighter spreads.
The major currency pairs like EUR/USD, USD/JPY, USD/CAD, GBP/USD etc. are the most actively traded pairs by Nigerian traders.
Minor and exotic currency pairs are not as widely traded when compared to majors, so they are mostly traded by expert level traders or local traders who can deal with their unpredictable price swings.
Ensure your broker offers a variety of currency pairs so you can easily diversify and hedge risk instead of putting all your eggs in one basket.
5) Place your First Trade through Broker’s Platform
After choosing the currency pair to trade, you can go ahead and send your order to the online market. Study the order types and execution conditions (instant or market execution) offered by your broker.
Some brokers offer different types of orders such as instant orders, pending orders that let you place orders instantly or at a pending price.
Consider using risk management tools like stop loss that automatically closes your open position when pre-set conditions are crossed/met.
You also don’t want to allow greed to get hold of you as such, you may want to consider using a take-profit order.
A take-profit order is an order that tells the broker to close your open position once you have made a certain amount of profit.
Basic Forex Trading Strategies
1) Fundamental Analysis
Fundamental analysis involves analyzing economic, social, and political forces that can affect the price of a country’s currency.
This includes economic indicators like interest rate, inflation, unemployment rate, GDP, industrial production, etc.
The screenshot at the top of this section shows some important economic data that are upcoming in the week. Fundamental traders try to predict where the data would go & then place their trades in that direction.
For example, if the US FED increases the Interest rate, then the Bond yields in the US would rise, and dollar-denominated assets will become more attractive to both local and foreign investors.
To buy these dollar-denominated assets, foreign investors will have to sell their local currency to buy dollars, thereby increasing the demand for dollars. The overall effect of this will be an increase in the strength of the dollar to the detriment of other currencies.
Wars can attract sanctions to a country, causing its economy to suffer and its currency to depreciate. Political events such as electing politicians with new ideologies can also scare investors away, thus depreciating a currency.
Key indicators important to fundamental analysts are:
- Interest rates
- GDP growth rate
- Employment statistics
- Trade balance reports
- Political events
- Military conflicts
- Quantitative easing
2) Technical Analysis
Technical analysis involves speculating on the movement of prices by studying previous price movements.
Technical analysts use charts to study price history, and price movements, and draw trend lines to connect two points & reveal hidden patterns in the charts.
Candlestick charts are the most popular charting tool for technical analysis. The candles can be set to indicate timeframes of 1 hour, 1 day, 1 week etc.
Green candlesticks indicate closing price for the timeframe in question (hourly, daily, weekly, monthly etc.) was higher than opening price, and red ones indicate closing price was lower than opening price.
Technical analysts look for familiar patterns in the charts, that indicate a trend is about to change. For example head and shoulders pattern means a bullish trend maybe about to turn into a bearish one and vice versa.
A doji candlestick pattern also indicates neutrality meaning the market is indecisive as opening and closing prices are at par.
Technical analysts also use indicators to further confirm chart patterns and read market sentiment. Volatility indicators such as ATR, Bollinger Bands, & VIX tell you how unstable currency prices are at a given time.
Volume indicators like the Chaikin Money Flow, show how many buyers and sellers are in the market at a given time. MetaTrader4 uses green bars to indicate that volume is on the rise and red for decrease.
Is Forex Trading Legal in Nigeria?
Forex trading is not illegal in Nigeria, but there is no local regulation in the country. Due to absence of regulation SEC has warned the general public that they trade forex at their own risk.
This is why you should trade with brokers who have top-tier overseas regulations. Top tier jurisdictions like the United Kingdom, Australia, and European Economic Area (EEA) have stiff forex regulations in place, and are considered Tier-1 regulators.
Offshore jurisdictions like Bahamas, Saint Vincent and the Grenadines, Mauritius, and other island nations are not known for stiff forex regulatory oversight.
Some offshore regulators let brokers supervise themselves which is not healthy so they are considered Tiers 2 & 3 regulators. However forex brokers still go ahead to register subsidiary companies in offshore jurisdictions because of tax breaks & other incentives.
For example a forex broker with a FCA license can also open a subsidiary in the Bahamas and move register Nigerian traders under Bahamas laws (which are not as strict) instead of UK laws.
Always check where your account is registered under by reading the customer agreement under legal documents.
In summary a forex broker who holds a Tier 3 regulatory license, should also have a combination of Tier-1 or 2 license for additional safety and comfort.
Check the bottom of the brokers page, or the about information on the brokers website for information on names of regulators for a broker.
Also keep in mind that if you ever have any issues with your broker that result in a court case, the hearing will take place in the country where your account is registered.
When Should You Trade Forex in Nigeria?
As a trade based in Nigeria, the best time to trade forex in Nigeria is the London session & overlap with the New York sessions, from 8AM to 5PM. This is because Nigeria shares a similar time zone with London.
The London session makes up, up to 37% of the total daily forex turnover and starts at 8 a.m. Nigerian time to 5:00 p.m. Nigerian time.
The London session also overlaps with the New York session between 1 and 5 pm GMT, thereby providing more liquidity, as the New York market is the second largest after London.
Trading with other time zones may deprive you of sleep, and you may not be getting as much liquidity as you will get when you trade with the London session.
Frequently Asked Questions on Forex Trading
What is forex trading?
The online buying and selling of currency pairs, with a broker serving as a middleman between buyer and seller who don’t meet in person.
Are there any easy steps on how to learn forex trading?
Yes, you can learn forex using a demo account offered by your broker for free. This way, you do not have to use real funds to learn as fake cash is provided.
There are also online educative materials on YouTube, and broker developed learning courses & games. Some brokers give you access to an online social community where you interact with more experienced traders to learn.
What is leverage in forex?
Leverage comes about when you borrow funds from your broker to trade. It is represented in a ratio. A 1:50 leverage ratio means that for every 1 USD you deposit, you can open a trade worth 50 USD.
Another way of looking at leverage is you only need to deposit 1/50th of the total contract amount while your broker lends you the balance.
If contract sum is 5,000 USD and leverage is 1:50 you only need to put down 100 USD required margin of your own money, and your broker loans you the rest. However you repay the loan with interest.
When using leverage of say 1:50 your losses are multiplied x50. This makes it dangerous for inexperienced traders.
Which is the best forex broker for beginners in Nigeria?
When considering a forex broker as a beginner look for those regulated forex brokers that offer low cost trading accounts.
Beginners should also look for forex brokers who offer the MT4 platform which is more suited for new forex traders who don’t need to use advanced strategies.
Those forex traders that offer Naira base currency accounts are also ideal for starters so that they avoid paying currency conversion fees. For example FXTM, Exness, and HF markets offer Naira trading accounts.
What are pips in forex?
Pip is the unit of measurement used to measure the change in the exchange rate of two currencies. If EUR/USD exchange rate moves from 1.0900 to 1.0901 the difference is 0.0001 or 1 pip. The zeroes are ignored and the last digits taken.
Consequently an exchange rate move from 1.0900 to 1.0912 means a 0.0012 difference or a 12 pip move.
Pips are important when trying to calculate profit or loss. If you have 10,000 USD in your trading account and want to buy EUR/USD at exchange rate of 1.0900 you can only afford (10,000 USD ÷1.0900) = 9174 units of EUR/USD
If exchange rate appreciates from 1.0900 to 1.0902 the difference is 0.0002 or 2 pips meaning you gain 9174 units x 0.0002 = 1.8348 USD