Business: Stock and Foreign Exchange in Nigeria; All you need to know
Nigerian trading market: a brief overview
Although somewhat similar, it is important to note the difference between stock and Forex trading. Essentially, the difference lies in what is being traded; stock trading refers to shares and ownership within a company or corporation, while Forex refers to the buying and selling of currencies. In both cases, brokers are often recommended for novice traders, as they act as the intermediary between the buyers and sellers who are looking to profit from either the company or the various currencies performances.
Much like in many other parts of the world, stock and Forex trading in Nigeria has become of interest amongst the populace, which is speculated to be due to how lucrative it can be. However, that is not to say that anyone and everyone who trades is guaranteed to profit from it, on the contrary.
Stock and Forex trading is legal in Nigeria, provided that the trader or broker adheres to the regulations and guidelines that govern the industry. Surprisingly, unlike in many other parts of the world, such as the USA, Forex trading in Nigeria is not heavily regulated.
This may be partially attributed to the fact that it is still a relatively new phenomenon that is steadily becoming popular amongst citizens.
Forex trading in Nigeria is regulated by the Central Bank of Nigeria, and brokers are required to meet certain requirements in order to trade on behalf of their clients. Moreover, earnings from trading activities are taxable in the country, and thus, must be declared accordingly in order to avoid finding yourself on the wrong side of the law.
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Similarly, stock trading in Nigeria is also governed by certain guidelines and getting started is reportedly a process that can be completed within two days. The steps include opening a trading or brokerage account, getting a Central Securities Clearing System (CSCS) account, and thereafter, getting a Clearing House Number (CHN). Upon completing this process and submitting the required documentation, one can start investing and trading in the Nigerian Stock Exchange (NSE), which reportedly boasts approximately 169 listed companies.
Given the growing interest in stock trading, it is important to note that it also comes with its fair share of trading and transaction fees, which one must familiarise themselves with.
Forex currency pairs and trading hours
It goes without saying that as a Forex trader or broker, one of the key things is to understand currency pairs and establish which are the most actively traded. Listed amongst the major currencies across the globe are the Euro (EUR), the US Dollar (USD), and the Japanese Yen (JPY), to name a few.
Moreover, popular currency pairs like the EUR/USD remain of interest in Nigeria as well. This particular pairing is one of the major Forex pairs, which is attributed to it offering minimal bid-ask spreads and it being described as a liquid pairing. Its volatility is also a draw card for many traders, as this means that any sudden changes can be capitalised on.
Experts claims that the best time to trade Forex in Nigeria is between 14:00 and 18:00 local time. During this four-hour period, two of the largest trading sessions, London and New York, are said to overlap, resulting in peak liquidity and an increased chance of profiting from the activity.
Source: Guardian Newspapers.