The scale of financial trading in Nigeria

Today there seems to be more and more conversation about trading in the Naija papers. Many prominent people talk about their investments and there have also been a couple of high profile fraud cases. You might wonder, though, how much real activity is taking place behind the headlines. Is it just hype, or is this really an important industry with a significant role to play in the national economy? In fact, it’s an industry undergoing a lot of changes, which makes this a really interesting time to start exploring it.

Shares and commodities: a shift in the markets

The first form of trading to take off in this country, as in most places, was the trading of shares. It formed the cornerstone of the market until fairly recently, when multiple factors, mostly stemming from the 2014 oil price crash, led to a downturn. It declined by 17% this year alone. Commodities trading, including oil but focused mainly on agricultural produce, is moving into the gap and could prove to be important in restoring Naija’s international economic standing. In the meantime, more traders than ever before are turning to forex.

The origins of Naija forex trading

The forex market first began to develop in Naija in 1986, after de-linking from the British pound and after oil began to push up the value of the naira, but it wasn’t until 1999 that it liberalised to the point where ordinary citizens could really make money from it. Improvements in telecommunications and internet access have given it a further boost over the past few years. Now anybody with some savings can sign up to a broker like Alpari and start trading alongside the professionals.

The growth of the forex market

Forex trading has been expanding rapidly ever since, to the point where $10m to $15m is now traded daily by private individuals. Most forex trading is carried out by banks and other private financial organisations, so that in total as much as $150m can be traded here in any 24-hour period – a figure that continues to grow. To compare it with a similar sized country, it’s around two thirds of the amount currently traded in Brazil.

Looking to the future

The major limiting factor in the growth of the Naija forex market at present is a lack of proper regulation. It’s still risky to use a local broker and far too many people get scammed, which understandably puts others off giving trading a try, although it’s pretty safe if you use an international broker. Improved regulations could encourage a lot more people to get involved and speed up its growth. This has advantages that go beyond the market itself, as trading is a major driver behind developments in online banking.

As trading continues to expand internationally, the likelihood is that it will continue to do so here, so you haven’t heard the last of the hype – and it may well turn out to be justified.

 

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