Forex trading in African countries is very popular. In general, the FX sector is growing every day but for the African continent, the statistics are showing more positive results. If you are not familiar with what is happening in the African FX market, down below we will outline a more clear picture.
There are several countries that are very popular with the number of FX traders as well as with the number of trading currencies. Not most but a high number of countries try their FX market as it is possible. According to the latest statistics, several countries like South Africa, Nigeria, and Uganda are the top 3 countries where this sector is extremely popular.
In this article, we will focus on the Nigerian Forex market because as the latest trend shows, the situation is not very positive and many investors are losing their money because of damaged fluctuations of the national currency. But before we will explain why it is happening and how we can reduce the level of damage, it is important to know what are the main characteristics of the Nigerian FX industry.
Forex Trading In Nigeria – Every Important Aspect
FX trading has been legal in Nigeria for a long period. More and more people, as well as brokers, are involved in the industry which makes this market very diverse. For sure, it has a great impact on the Nigerian financial situation for specific reasons. The main features of this growing market you have to know are about currency pairs and the best trading times. We are not going to outline the legal framework because the regulations for the FX market are not specific. So if you are familiar with FX legislation in general, remember that the Nigerian government does not require any different or difficult parts.
As said, the dominant currency for trading still is USD against EUR but because Naira is the national currency, it is very commonly used in trading platforms too. Another very popular currency is the Japanese Yen.
Most of the country’s golden hours for FX trading are from the morning to afternoon but in Nigeria, the best time for Forex begins at 2 pm and lasts till 6 pm. Similar to others, the market is open 5 days a week for 24 hours. But if you want to experience higher liquidity and better trading opportunities, make sure you are trading between the mentioned 5-hour period.
Similar to most other countries, the most well-known and used platform for FX trading is MT4. The number of new traders is increasing and the number of created demo accounts is significantly higher. If you want to check the market of Nigeria FX, you can try trading out on a demo account. With other statistics, mobile versions are very popular but only 35% of Nigerian traders use them. We have to mention that the average age of traders is quite low and it is from 25 to 34. According to the latest data, in Nigeria, there are 300 000 traders and 45% are women.
What Has Happened To the Nigerian FX Market And Why People Lost Money?
Nigeria is faced with a high inflation rate in 2022. As the vice president of the country claimed, it was clear that Nigerian investors would have to handle the high rates of inflation to balance stable and safe trading. This is not only caused by countries’ internal factors but also global influences where one of which was the U.S financial situation. Another important factor was the very low price of oil, which is one of the central export products for the country. It is important to mention that the current price is the lowest since 2014.
Because of these factors, the national currency Naira rate significantly reduced and increased the risk, especially for foreign investors. More specifically, the current rate is reduced by 50%. Solving this massive problem which continues the negative trend is hard but on any occasion, investors should try to save their finances from these impacts.
Because the future of the Naira is still unpredictable and unstable, the main recommendation from experts is to save the foreign currency and use NGX’s future contracts for a more stable trading future. If investors try to use forward contracts, which is the same as binding an agreement, they will be able to reduce the future risk caused by inflation. Another way is to make investments in defensive stocks or use specific strategies for better defense because, as is predicted, the Naira will continue to fall.
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