Featured Forex Broker: FOREX.com
FOREX.com is one of the world's largest forex brokers. Account holders get competitive pricing, award-winning customer service, actionable data, and powerful trading platforms to help you make the best possible trades.
Nigeria has one of the most vibrant economies in Africa. Vast oil reserves and a wealth of natural resources contribute to its relative success. Since the beginning of the new millennium, many Nigerians have increased access to global capital markets due to decreased internet connectivity costs and the gradual acceptance of global payment systems.
Nigeria’s growing economy and export revenue have also created an increased demand for forex, which has led several international brokers to establish a presence in the country.
That said, the Central Bank of Nigeria (CBN) has recently placed a forex restriction on 50 local products, including rice, tomatoes and palm oil, to boost local production and stimulate the export market.
Trading Forex in Nigeria
If you’re a forex trader in Nigeria, it’s important to be sure you don’t open an account with an unregulated broker. Forex brokerages in Nigeria have oversight from the Central Bank of Nigeria (CBN), which has set forth guidelines for forex brokers in the Banks and Other Financial Institutions Act of 2007 (BOFIA).
If you’re a forex broker in Nigeria, BOFIA requires you to maintain segregated accounts for client funds. Client deposits must be maintained separately from the company’s, which protects the company in the event of bankruptcy or legal actions against the broker.
Some forex brokers in Nigeria have not been licensed by the CBN and may not segregate their clients’ accounts. Be sure to avoid these brokers, since many scams have taken place in Nigeria that can leave you with little or no recourse to recover your lost funds if you do become a victim.
How to Start Trading Forex in Nigeria
Before embarking on your trading voyage, be sure to educate yourself on the forex market and how to analyze and trade it. (One of the main reasons the majority of novice currency traders fail within a short period of time is because of their lack of knowledge about the forex market.)
Even if you have prior experience trading in the stock market, the forex market has considerably different dynamics and fundamentals. The forex market dwarfs any other stock market in the world just by its daily average turnover alone, in excess of $5 trillion per day.
Another major difference between the forex market and any other world market is its trading hours. The forex market trades continuously from 5 p.m. EST on Sunday until 5 p.m. EST on Friday.
With respect to educational resources for new traders, many online brokerages offer educational materials, including articles and videos, that explain many of the technical and fundamental analysis methods you can use to determine the market’s future direction.
One of the best ways to get familiar with the forex market involves trading in a demo account. Most online brokers offer their clients and potential clients a free demo account to buy and sell with virtual money without having to commit any real funds. This gives you more insight into the forex market and your own trading behavior that you would otherwise not get from watching videos and reading material about the market.
Step 1: Consider Your Needs
If you have extensive experience trading capital markets and have a background in technical and fundamental analysis, aim for a broker with resources that are familiar to you. If you have limited experience and would like to increase your knowledge of forex trading, look for a broker that can offer high-quality educational material.
It’s also a great idea to open a free demo account with one or several brokers to gauge whether you like their trading platform. In addition to their proprietary trading platforms, many forex brokers also offer the MetaTrader4 and MetaTrader5 trading platforms by MetaQuotes, so you can download and learn how to use that popular trading software as well.
Demo account trading can also help you get an idea of the broker’s dealing spreads and response time to your orders.
Step 2: Pick a Broker
Once you have evaluated your options, you can then select the best forex broker for your needs. When you choose a forex broker, the elements that can directly influence your success include:
Regulation
One of the most important factors when choosing a forex broker is the safety of your funds, so pick a broker that has oversight by one or more government regulators to safeguard your money.
Most brokerages with a presence in Nigeria have oversight from the CBN, but choosing a foreign broker with strict regulation might offer even greater fund protection. Many foreign brokers with Nigerian clients have oversight from excellent regulatory bodies, such as the UK’s Financial Conduct Authority (FCA) or Cyprus’ CySEC that enforces operations under the EU’s Markets in Financial Instruments Directive (MiFID).
Forex.com has numerous customers in Nigeria and is regulated by the U.S. National Futures Association (NFA) and the Commodities Futures Trading Commission (CFTC).
Market Maker or ECN
Forex brokers primarily deal either as a market maker or by accessing an Electronic Communication Network (ECN).
An ECN broker shows the best bids and offers rates available to clients from a group of market makers. After finding the best quote, the ECN broker then fills your order at the best possible exchange rate. Some ECN brokers charge a small commission on trades due to the typically tight bid/offer spreads.
A broker that functions as a market maker will fill your order by taking the other side of the trade at the dealing price. This might create a conflict of interest if you trade profitably and the market maker does not offset the trade with another market maker.
Dealer Spreads
Brokers generally make their money by taking advantage of the difference in the exchange rate at which they buy and the rate at which they sell. This is known as the bid/offer or dealing spread. If you’re an active trader, the dealing spread will directly affect your costs, which means that a broker with narrow dealing spreads could save you a lot of money in the long run.
Leverage and Margin
Leverage consists of the size of trading position you can control with $1 placed on deposit as margin. The margin is the amount of money you put up to hold a trading position. For example, if the leverage on your trading account is 100:1, then for every dollar you put up, you can control a position worth $100. If you deposit $1,000 with that ratio, then you can control a position worth $100,000.
Make note that trading with leveraged positions means that the money made on profitable trades can be considerable, depending on how much leverage the broker allows. Nevertheless, your losses are also magnified, potentially putting your entire account balance at risk if the market moves significantly against you.
Trading Platform
In addition to their own proprietary trading platforms, many online forex brokers offer the popular MetaTrader4 and MetaTrader5 platforms from MetaQuotes. The two platforms are considered the standard in the industry and offer many valuable analysis tools, including an excellent technical analysis suite.
Other important tools featured on MetaTrader’s trading software include a news feed and a customizable interface. You can even automate your own trading plan using its programming language.
Also, a wealth of third-party developers market their programs for market signals and automated trading called “expert advisors” (EAs), which you can download and apply to your own trading account.
Demo Account
Use a free demo account to evaluate a broker and hone your skills as a trader before you begin trading in a funded account.
Customer Service
You should be able to easily contact any broker, with any questions or concerns you may have. The broker should be able to be reached through telephone, live chat and/or email in the event of an erroneous trade or if you simply need to ask a question.
Educational Material
If you have little or no experience trading forex, many brokers offer a wide range of educational resources that you can use to improve your understanding of markets and trading. These include articles, videos and other tools to help you make trading decisions.
Step 3: Open an Account and Start Trading
After choosing the best online brokerage for your particular needs, you can open a demo account or a live funded account to begin trading. If you have never traded, stick to small trades in the beginning. Only increase your position after your trading plan has been consistently successful.
Remember, your demo account results may be significantly different than when you trade in a live account. This is usually because you tend to behave differently when you have a risk of losing money versus when you trade in a demo account where no real money is at stake.
Before you begin trading, make sure that you have a plan of action. A trading plan that incorporates good money management principles and which can be easily followed will often make the difference between a successful and unsuccessful trader. Trading with a good plan of action also gives you greater confidence when you deal with the high volatility in the forex market.
Final Thoughts
Nigeria’s forex market depends in large part on how you choose a broker. Finding the best online brokerage to trade forex depends on filling your needs as a trader and staying safe with a fully-regulated broker.
Remember that even experienced traders can lose money (even when they use the best brokers). Keep in mind that one of the most important elements to successful forex trading involves a good trading plan and the ability to maintain the discipline needed to follow it.
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