How to Start Forex Trading in Nigeria

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Contributor, Benzinga
January 12, 2024

Many experts, including famed investor George Soros, call Africa the world’s fastest growing middle class, and Nigeria is leading the way on the continent. Alongside a consumer spending boom and widespread commercial construction, modern Africa is marked by a growing interest in retail investment opportunities. 

The accessible, decentralized nature of the forex market connects investors around the world, and Nigeria is 1 of the countries taking full advantage of the market. A recent report from Dailyfx, a leading forex research firm, tells us that forex attracts upwardly mobile Nigerians looking for stable, consistent investments. If you are looking to trade on the forex market in Nigeria, here is what you need to know.

Disclosure: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Get Started with Forex in Nigeria

Follow these steps to get connected with the worldwide forex market:

  1. Get an online connection. You can get connected to a forex broker through any online device, but it’s usually good to trade primarily from a home office. You’ll be taking in a lot of information to make investments, and all of that information is easier to fit on multiple screens. Make sure your connection is strong and latency free.
  2. Pick a reputable broker. Your forex broker is the company that will connect you to the market. Forex is a decentralized market with relatively little regulation, so not all brokers come to you fully-vetted. Do your research and use virtual accounts 1st.
  3. Open your account. Once you pick the broker you like, follow that broker’s process to open the account. You will verify your identity and connect your bank account.
  4. Fund yourself. You need money to make money! Fund your forex account from your 3rd party bank, a check, a debit card or a credit card.
  5. Install your trading platform. Many brokers have proprietary trading platforms. Some integrate with 3rd party providers. Either way, you’ll need to download the trading software. This is the user interface you will use to make investments in the market.
  6. Profit. This is easier said than done, but definitely possible for a hardworking investor!

Nigeria Forex Trading Strategies

If you want to trade forex successfully, you need a core strategy. You’ll also need a working knowledge of multiple strategies so you can understand the reasoning behind short term moves.

Scalping

This lightning fast strategy attempts to skim just a few pips (basis points) off of each trade. If you are a scalper, you may only hold a trade for a second or 2 before exiting. You should have a working knowledge of indicators, and you need a fast trading platform and Internet connection with no latency — timing is everything in scalping. This strategy relies more on a knowledge of how charts move rather than the fundamentals pushing the long-term movement of currency pairs.

Day Trading

A forex day trader performs intraday trades and is in all cash by the end of the day. Day traders want to avoid large overnight moves. This is less of an issue in the forex market because it trades 24 hours a day. However, traders can still avoid the weekend pause with this strategy. Day trades may last for the entire trading period or can last for only a few seconds.

Swing Trading

Swing positions look to profit from short-term moves. These positions may be held for a number of days, but they don’t have to. Swing traders may need to understand the fundamental macroeconomics behind a currency pair in order to make money. Because the potential time frame of a swing trade is longer than a scalp or a day trade, news items and macroeconomic conditions can exercise more influence over them.

Positional Trading

Potential trading is also known as long-term trend trading. These traders are looking for large shifts in the price of a currency pair. If you’re a patient trader who doesn’t care about small, short-term chart moves, this type of trading may be for you. You’ll need to have a good knowledge of market fundamentals and the infrastructure of the individual currency you’re trading.

Forex Trading Example in Nigeria

Let’s say NGN/USD is trading at 0.002575/0.002595 and you think the price will rise, so you prepare to buy the pair. You want ₦1,000,000. The margin rate of this currency pair is 4.02%, so you will only need $103.92 in your account.

The NGN/USD price moves up and is trading at 0.003010/0.003030 after 4 hours. You have enjoyed a move of 4.15 points, and your profit is (₦1,000,000*0.003010)-(₦1,000,000*0.002595) or $415.

Making Money with Forex in Nigeria

There are many ways to make money with forex. Here are some of the more popular vehicles.

  • Shorting the market You may be good at determining when a currency pair is priced too high. If so, you can short them to profit. Shorting means you are borrowing a currency to sell it so you can buy it back later at a hopefully lower price.
  • CFDs: Contract for differences (CFDs) track currency pairs. The chart of a CFD will look the same as the currency pair you are targeting, but you never actually own the currency. This strategy has more to do with the type of broker you want to use than an actual strategy.
  • All or nothing (binary) options: You can trade in an all or nothing fashion instead of following the price directly. Binary options give you a yes or no scenario — if a currency pair price is above a certain level at a certain date, you win money. If not, you lose.

Best Online Forex Brokers in Nigeria

Study a number of forex brokers before committing yourself. The broker you pick could make a difference in your trading strategy.

  • securely through Tickmill Investing's website
    securely through Tickmill Investing's website
    Best For:
    Low Deposit Requirement
    Rating:
    Read Review
  • securely through Moneta Markets's website
    securely through Moneta Markets's website
    Best For:
    Scalpers
    Rating:
    Read Review
  • securely through IFC Markets's website
    securely through IFC Markets's website
    Best For:
    Best for Leverage Trading with Many Instruments
    Rating:
    Read Review
  • securely through Forex.com NON US's website
    securely through Forex.com NON US's website
    Best For:
    Forex Trading in and Outside the U.S.
    Rating:
    Read Review

    CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

  • securely through eToro Crypto Non-US's website
    securely through eToro Crypto Non-US's website
    Best For:
    Demo Accounts
    Rating:
    Read Review

    Cryptocurrency is offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk

    Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more

What to Look for in a Nigerian Forex Broker

Whether an online forex broker is based in Nigeria or somewhere else, the best online brokerage should generally have these 11 elements covered:

  • Oversight from a reputable regulating agency
  • A good reputation among forex traders
  • Allow you to open and trade in the type of account you want
  • Require a minimum deposit you can afford
  • Give you access to trade all forex pairs and other assets you may want to trade
  • Maximum leverage ratio high enough for your trading strategy
  • Competitive dealing spreads
  • Provide you with protection against negative balances
  • Keep slippage and re-quotes on orders to a minimum
  • Maintain client funds segregated from your own money
  • Withdrawal and deposit options to suit your needs

Another important consideration is the trading software the broker supports. While some brokers offer clients a proprietary trading platform, many provide market access and platforms from 3rd parties such as MetaTrader 4 and 5 from MetaQuotes, as well as cTrader and NinjaTrader.

Forex Terminology

There are some basic terms that every forex trader must know:

  • Pip: Usually equated with U.S. $0.0001, the pip is the smallest distance that a currency can move up or down. This is also known as a basis point.
  • Lot size: This is the amount of currency that you will trade at once. If you choose a standard lot size, you will trade 100,000 units. You can also trade in microlots (fractions of a standard lot).
  • Orders: The order is the description of how you enter and exit the market when investing.
  • Calls: A call option gives the buyer the ability to buy a certain amount of currency at a certain price on a certain date. They can be traded as well as currency pairs. Their values are correlated closely with the currency pairs they represent.

Money Around the World

Connecting your personal economy to the world can be an exciting proposition. Forex gives anyone from any country the ability to move in the global economy. With skill, you can improve your financial valuation, create a stable income and build a nest egg.

Frequently Asked Questions

Q

Can I legally trade forex in Nigeria?

A

Forex is unregulated in Nigeria.

Q

What are the best forex brokers in Nigeria?

A

There are several to include Pepperstone, FXTM and IC Markets. 

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  • EUR/USD as low as 0.2 with fixed $5 commissions per 100,000
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