Forex trading has recently taken Nigeria’s trading market by storm. An increasing legion of Nigerians – interested in maximizing their funds – is largely focused on forex trading today. However, if you are new to forex trading and are planning to enter into the market avidly, do not make haste but first ensure that you are well familiar with the rules and regulations of the trade type in your country. That said, our guide to the forex trading rules and tips is sure to come in handy for you. Learning the nitty-gritty of forex trading will help you considerably in making your initiative a real success. So let us get started below.
Regulatory Environment of Nigeria
Although forex trading in Nigeria is thriving, it is important for all existing and potential forex traders to know that the trading is governed exclusively by the Central Bank of Nigeria (CBN). To ensure that the trading goes along effectively without any hoax or unfairness, the CBN has laid down and exercised various rules for all to adhere to.
Incidentally, the three most important regulations in regard to forex trading are as follows:
-Individuals and businesses can buy a foreign currency for exchange in a specific amount set by the CBN
-A restriction is imposed on using foreign currency for specific transactions
-Each forex transaction will be made only by dint of certified dealers
Failure to adhere to these regulations is most likely to entail any individual or organization going through various penalties, for example, fines or incarceration.
What Moves the Forex Market in Nigeria?
Multiple factors are responsible for moving the forex market in Nigeria critically. Some of them are as follows:
The Economic Data
The value of a currency is subject to vary depending on a variety of economic factors, for example, inflation, GDP, and unemployment. To put it simply, if the inflation rate in Nigeria is beyond the normal limits, the value of their local currency, ‘Naira,’ is subject to reduction too. After all, forex traders are basically interested in investing in currencies going under lesser inflation rates.
Also, a variation in the interest rates also has the potential to impinge on the value of a currency. If there is any raise made by the CBN in terms of the interest rates of the Naira, the value of the monetary currency will also skyrocket. Suffice it to say. This is high time for investors to invest in forex trading to get higher returns.
Political Stability of the Country
Political instability has the potential to cause turbulence in the forex market and cause the currency values to vary up and down too. Putting it simply, if a political crisis comes about in Nigeria, forex investors are very likely to draw them back from investing in the Naira, only to result in thinning out its effectiveness.
A broad array of global events, for example, natural calamities such as hurricanes, landslides, wildfires, pandemics, and political factors, also contribute to overturning the forex market. To put it simply, if any of such mishaps come about, by long odds, investors will consider choosing other optional currencies, thus causing the Naira to dilute.
Changing Oil Prices
Nigeria is a prominent producer of oil in the world. That said, the Nigerian economy is subject to either going up or down depending on the deflation or inflation of the oil price respectively, thus also affecting the value of the Naira in the meantime.
Currency Intervention by the Central Bank of Nigeria (CBN)
The CBN may overturn the market anytime by intervening in it to even out the exchange rate and keep inflation in line. The same is very likely to affect individuals or organizations looking to purchase or sell the Naira through forex trading.
For every beginner in forex trading, it is of crucial importance to learn that the forex market is very volatile and is subject to vary depending on a variety of factors, as mentioned above. Suffice it to say forex traders should keep a tab on various economic indicators, political events, and other relevant news so that it can be a breeze for them to trade conveniently and effectively in the market.
Tips for Navigating the Nigerian Forex Market
Here are the best tips for navigating the Nigerian Forex Market:
- Before you embark on forex trading, do learn the nitty-gritty of it. Simply put, as a beginner, acquire the basic knowledge of various currency pairs and exchange rates, including the pros and cons of forex trading.
- Consider using a demo account and trying out your trading strategies before you take the step to risk your real money. This will help you acquire know-how, experience, and confidence to do business well eventually in the Nigerian market.
- Watch over all up-to-date market news and analysis, specifically in regard to Nigeria. Also, it is worth noting that economic and political events in the country can exercise influence their currency prices to either inflate or deflate.
- Diversify your portfolio by trading multiple currency pairs, as it is a great way to cut down any potential risk and improve your odds of turning a profit from forex trading.
- Choose only certified and the best forex brokers in Nigeria. This is because such brokers, in general, adhere to hard and fast regulations and maintain transparency in their operations.
- Create a strategic and trenchant trading plan and follow it strictly. In simpler terms, your plan should include your trading goals, risk management tactics, etc., specific to the Nigerian market.
- Keep abreast of the rules, regulations, and policies updated by the Central Bank of Nigeria in regard to forex trading in Nigeria.
- Gain insight about the Nigerian Naira rate initiative against other currencies and how it may affect your trades.
- Get in touch with other experienced traders in Nigeria so that you can get and utilize their valuable advice on choosing the forex brokers and also how to maximize forex trading in the country.
Forex trading in Nigeria is thriving and can turn out to be a very cost-effective investment opportunity for investors there, provided that they adhere to the rules and regulations implemented by the Central Bank of Nigeria or CBN.
Hopefully, the information included in our guide is sure to come in handy for every Nigerian investor all set to enter the forex market. Also, by choosing the best and most regulated forex broker, traders have the opportunity to tap the market and enhance their odds of success.