How does forex trading work in nigeria

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By the time Nigerian foreign exchange users approach their banks for their forex needs this week, after the ban on bureau de change operators from the direct supply of FX from the CBN, a regime of transparency, ease of transaction, and stability is what they will be expecting as anything short of that will make last week's crackdown on BDC operations an exercise in futility, reports Festus Akanbi.

After a long spell of indiscriminate rate fixing by operators of Bureau de change in the nation's foreign exchange market, the Central Bank of Nigeria CBN eventually came out of its shell to eliminate BDC operators from the chain of forex traders with access to official supply.

It also announced that it has now permitted banks to receive forex deposits. And for those thinking the apex bank may have a change of heart over its action, its Director, Monetary Policy Department, Dr.

Hassan Mahmud said there is no going back even as the CBN is set to commence the refund of capital deposits and licensing fees, where applicable, to Bureau De Change BDC promoters who had pending licence applications before Tuesday's announcement of the end of FX sale to the currency dealers. Similarly, the banking sector regulator, in another circular, directed all banks to set up teller points at designated branches across the country to fulfill legitimate FX requests for Personal Travel Allowance PTA , Business Travel Allowance BTA , tuition fees, medical payments, and SMEs transactions, among others.

However, as the nation awaits the implementation of the new policy of selling dollars directly to commercial banks for onward sale to the public, the Naira has continued to be at the receiving end with rates oscillating between N and N at the parallel market between Wednesday and Friday last week.

Such was the confusion and arbitrage that characterised the forex market after the CBN threw the bombshell, as some dealers moved to cash in on the CBN's directives before the banks settle down to the business of full-scale forex sale to end-users. Stunned by the CBN's surprised ban from its supply of forex, some BDC operators said Nigerians FX users will pay dearly for the unfolding development, considering the unreliability of banks to carry the CBN's instruction to the letters.

The current spike in the value of dollars is blamed on the decision of some operators to hoard the currency, having got winds of the CBN's plan to ax that segment of the foreign exchange market as well as the panic buying by some FX users who anticipated a prolonged period of rates instability. Gwadabe said the planned engagement would, among other things, seek to identify and sanction earring BDCs.

Gwadabe said in a statement that the pronouncement by the CBN did not stop BDCs from providing FX services as allowed by their operating licences and in their operating guidelines.

Gwadabe said, "BDCs are licenced to provide retail FX services, including buying from the public and also selling to end-users for allowable transactions, namely, PTA, BTA, payment of medical, and school fees.

Wigwe said customers could walk into their banks to purchase dollars for legitimate transactions. He noted that the banks had agreed that the process would start immediately following a meeting with the CBN. Wigwe, who is also Group Managing Director of Access Bank Plc, said the banks were ready to meet the mandate of the CBN, adding that they have more than enough capacity to deliver.

He explained that the process would be centralised to avoid abuse. In addition, Wigwe said banks yet to adhere to the mandate by the regulator to create a forex desk would be sanctioned. There is no doubt that the assurance given by the chief executives of banks to ensure full implementation of the CBN directives in their respective banks came as a boost to the apex bank's policy change, however, industry watchers contend that the promise made by bank CEOs, and the cooperation of banks' staff assigned to interface with the potential forex buyers are different things.

The Governor also announced a ban on the over BDC applications it receives monthly. Emefiele however said, "The bank would henceforth discontinue its sales of foreign exchange to BDCs. Operators in this segment of the market would now need to source their foreign exchange from an autonomous source. They must however note that the CBN would deploy more resources to monitoring these sources to ensure that no operator violates our anti-money laundering laws; The bank would now permit commercial banks in the country to begin accepting cash deposits of foreign exchange from their customers.

In their separate interviews with THISDAY, leading economists, who described Tuesday's intervention as necessary, however, cautioned that the apex bank needed to go the extra mile so that the policy will not be counterproductive at a period of rising demand for foreign exchange. She, however. Meanwhile, there seems to be a consensus among economists on the need for the regulators to create an additional avenue for the sale of foreign exchange.

The fear is that unless the CBN looks beyond banks for the sale of forex to the end-users, undue pressure may be brought to bear on the local currency, which may depreciate further and eventually make the new policy backfire. Industry watchers said there is a need to learn from the past when officials of commercial banks made a kill from fx sales by giving all manner of excuses to disqualify customers from forex sale while some bank officials indulge in forex roundtripping.

Chukwu warned that "The concern is that the new policy may bring about more problems than the CBN intends to solve. The fact is this. You have a commodity that is in short supply. You have further constricted the supply channels, so it follows that unless you expand the supply channels you are going to have an increase in the arbitrage, so it's expected. So, the question is, what are the other options available to the regulator? Chukwu believes that the more the merrier.

He said, "The basic thing for me is that the CBN should have a cocktail of other policies that will address all those concerns to ensure we don't see a depreciation of the currency that will far outweigh the benefits of this new policy. These people include small-time traders, who are buying goods.

It simply means if someone takes a vessel from the NNPC, he pays the vessels owners in dollars and most of them buy their money from the BDC market.

Government should legislate that all cabotage transactions are denominated in local currency so that these people who are doing oil and gas trading will not need to be going to buying money from the parallel market.

It means those bringing PMS and others will have to source for dollars and if you go to the banks, you will not get these dollars, so the government will either legislate so that all such payments are now done in the local currency to avoid these demand that will go to the parallel market and shoot up the exchange rate. Adebajo believed "This situation offers the banks an opportunity to create a viable FX interbank market with transparent bid and offer rates that Nigerians can access via the existing inter-banking platforms.

According to him, "How long this will last is yet to be seen, as we recall that CBN last year for separate reasons suspended sales to BDC and resumed several months later. Spike in parallel market rates temporary. Femi Awoyemi shares similar optimism on the ability of the parallel market rate to stability very quickly. He said, "Concerning the spike in the parallel market exchange rate, I agree with you said the spike in the parallel market rate is likely to be temporary, explaining, however, that "the retail market needed to fund payment of school fees, medical expenses, and travels would gradually adjust to sourcing FX from the banks as the banks themselves rethink the customer transaction experience and tweak services in a way that eases access to FX in the retail market.

But Awoyemi disagrees with the CBN policy on interest rates, saying "My first observation is that it is odd to see the CBN attempt to control the supply and cost of money. Basic microeconomic frameworks suggest that policymakers can either control price interest rates or quantity money supply but not both simultaneously. Tope Fasua shares Awoyemi's optimism on the temporal nature of the current spike in the dollar exchange rate at the nation's parallel market.

He said, "My take is that the spike in the value of dollar vis a vis the naira will be temporary especially if the CBN moves strongly on its stated policies and oversight function with the banks.

The invisible trade transactions which the BDCs are meant to take care of will be well serviced through the banks thus reducing pressure on foreign reserves and the black market. I reckon a lot of the funds allocated to BDCs ended up funding imports of which we haven't been able to extricate ourselves as a country.

So those imports may fall back entirely in the black market thus pushing their prices up. However, the same players have an opportunity if they consider producing locally. However, unlike some other commentators on the new policy of the CBN, Fasua maintained that banks will make a difference once they settle down for business. The banks and their executives have a lot more to lose than sundry BDCs with no offices and no substantial prime movers behind them or the many licenses obtained by politicians and all sorts of powerful people.

By submitting above, you agree to our privacy policy. Compliance, control, operators, and even executives have to come together for such to happen, and even then there is a high chance for whistle-blowing. I also believe that customers can and will put the banks under pressure and hold their feet to fire to prevent cheating. Banks that are. Most will avoid the embarrassment," he stated. Bismarck Rewane described the bureau de change operators as financial intermediaries between the apex bank, the market, and the retail end.

He explained that what has happened in the past is that these guys were to sell foreign exchange principally to people traveling out of the country, but from tourists coming into the country, noting, however, that along the line, they derailed. What has happened was that these guys will buy the dollar at N and an hour later, sell it at N By , it had increased 27 folds, in other words, we had operators from By , the figure has gone up to No country in the world can survive that kind of hemorrhage, so that was why the CBN had to take steps," Rewane said.

According to him, "Some have argued that after all, they were licensed by the CBN in the first place. The reality is that what has happened is like a daytime robbery. The question now is what are the steps to be taken? He said "There is need for administrative control, but the problem is that the moment you stop things administratively, you now create a certain black-market premium. People are going to be inconvenient. I agree with the CBN Governor, but you and I know that walking into a bank and coming out in five minutes is something else.

It's easier to put 60 flies in a matchbox than to go into a bank and come out in five minutes. Rewane is not unaware of the challenges of transacting business in Nigerian banks. That was why he called for close monitoring.

So, people will suffer. The ultimate solution, which I will like to recommend, is that the CBN should encourage everyone to go to the bank but it should sell to bureau de change at the parallel market rate by five percent, in other words, if the parallel market is N, you can sell to the bureau de change at N The N10 margin is way lower than the N margin.

He however warned that the efforts of the apex bank to instill discipline in the foreign exchange market will be counterproductive unless a market solution is put in place. He insisted that "Nothing is cast in stone. The truth is that administrative solution has its limits. It will be abused one way or the other, so the best thing to do is to have a market solution and they can work together. Read the original article on This Day. AllAfrica publishes around reports a day from more than news organizations and over other institutions and individuals , representing a diversity of positions on every topic.

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# 1 Guide to Forex Trading in Nigeria

Tap into emerging trends in Nigeria Forex Market. Best Regional Regulator. National Currency. Licensed FX Brokers. Tax on Capital Gains. Forex trading is a very popular venture among the tech-savvy younger generation of Nigerians.

how profitable is forex trading in nigeria.

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How long have you been in the forex trading space and what has been the experience for you? I became aware of the Forex Market while I was working as a database manager with one of the banks in Nigeria. I was amazed at how much the bank made on a daily basis and this got my attention because I discovered the financial market brought a lot of volume into the bank. In I started learning and trading. I always tell people that you need a mentor; you need to find those who are succeeding who can help make the journey simpler. This is ; apparently I have been in this space for over 10years. What inspired you to invest in the crypto space at a time when many people in Nigeria were sceptical about the activities therein? The Forex market, crypto market and stock market are all instruments in the financial market. For me, playing in the crypto space is important for everyone who is less than 60yrs old because in the next years cryptocurrency and Blockchain will take over almost everything in the finance space. You need to understand that every years, money changes its form.

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how does forex trading work in nigeria

What is forex trading in Nigeria? How does it work? Forex is a transaction type that involves the buying and selling of currencies. Learn more about trading forex in Nigeria. What is forex trading in Nigeria, and how does trading forex in Nigeria work?

Forex trading in Nigeria became popular in the s, now it has grown to a point where Nigeria is one of the fastest-growing forex trading nations in the world. Yet, a lot of Nigerians still find it difficult to find good forex brokers in Nigeria.

Forex Trading jobs in Nigeria - Feb 2022 update

The Covid 19 pandemic and its severe impact on world economies and the financial situation of individuals across the globe have brought to the fore more than ever the realization that it is hard for people to survive depending on just a single source of income. What the crisis has highlighted is that ideally, individuals need to seek out opportunities that are solid and as pandemic and disaster-proof as possible. It thus comes as no surprise that Nigerians, and especially the younger generations, have recently begun to be seriously looking into the trading of forex. Forex trading is comfortably ranking as the biggest and most liquid market in the world holding much potential for profit and lucrative opportunities. And thanks to the existence of many online forex brokerages, which provide access to the market for all, Nigerians just like the residents of most other counties in the world, are able to trade from anywhere and at any time online and from any smart device. Though some point to the fact that earning money from speculating on currency prices against each other is not morally acceptable and thus perhaps counterculture for Nigerians, the boom in the interest for Forex trading from this country, shows that those with such concerns are in minority.

How it works?

Forex is the largest, and one of the most liquid markets in the world. That scope and size create several unique challenges, regulation being one of them. A few years ago, currency trading was like the black market, with virtually no laws, no rules, nothing. Traders and investors completely relied on the mercy of brokers and banks. Those who are against laws and rules would prefer trading during those days.

FXTM is proud to have been one of the first brokers to establish a serious presence in Nigeria, and offer access to the financial markets to investors.

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Forex trading in Nigeria is very lucrative. Starting with a demo account is strongly recommended for newcomers to the forex industry. In forex trading, the higher the profit, the higher the risk.

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Similarly, whenever an exporter in Nigeria sells commodity like Oil to a foreign buyer, they are dealing in the forex market. In simple terms, Forex Trading is the exchanging of one currency for the other. Currencies are bought and sold against other currencies all the time. As an example, when you travel abroad, you are exchanging Naira for Dollar or other currencies.

You are aware of the recent buzz around forex trading in Nigeria.

Forex trading in Nigeria is becoming increasingly popular for investment and as such the process has gradually become easier over the past decade. If you are looking to get in on the action and start to trade forex in Nigeria here are some insights to help you get started. Forex traders will need a smartphone or computer, a stable internet connection, some capital, and an account with a reputable forex broker. Electricity connection in Nigeria can be temperamental, to say the least, and bearing in mind that forex trading can be time-sensitive, this can often prove problematic. However, connections in urban areas are becoming more stable so this should help. It is wise for forex traders in Nigeria to input a hard stop loss when trading to prevent huge financial losses in the event of lost internet connectivity.

The number of Nigerians interested in making money online is growing by the day. Many of our youths between the ages of 21 to 35 years are willing to learn one or two online skills that can be used to make legit money online in Nigeria. In , trading of foreign exchange Forex is one of the simplest ways to some quick cash online and this is due to the fact that anyone with a smartphone or laptop connected to the internet and little basic about currency trading and exchanges can become a Forex trader and start to make money online.

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  1. Kaseem

    More of these blog posts.