Africa is starting to catch up with the rest of the world in terms of economic growth. In particular, sectors like real estate, mining and information technology are seeing high levels of investment in countries like South Africa. In other parts of Africa, we can see how the Nigerian financial sector has grown exponentially through interest in cryptocurrency and forex trading.
Cryptocurrencies and forex trading have grown the most, mainly due to increased mobile phone penetration in the country and interest from Nigeria’s young population (Africa has the most young in the world). That said, forex trading remains more prevalent than cryptocurrency trading, as the Nigerian government has conflicting views on virtual currencies. In February 2021, the Nigerian government blocked banks from allowing cryptocurrency transactions in the country.
Forex Trading in Nigeria
According to a 2021 report, there are approximately 300,000 retail forex traders in Nigeria, and there has been a substantial increase (46%) in the number of female traders over the past two years. For perspective, forex exchange is the largest financial market in the world, and forex trading involves converting one national currency into another. The most common currency pairs in forex trading are GBP/USD (British Pound/US Dollar) and EUR/USD (Euro/US Dollar). In Nigeria, the most common currency to trade with is the US dollar, which according to reports accounts for around 90% of Nigeria’s foreign exchange business.
There are different types of foreign exchange markets, including the swap market, but the most important are the spot market, the futures market, and the futures market. The spot market is the largest foreign exchange market, surpassing the futures market, which is now mainly used by companies that trade with foreign exchange contracts. Even though forex trading has seen tremendous recent growth in Nigeria due to mobile penetration and the ability to trade national currencies through mobile apps, the African country has had a long interest in forex since the 1970s. .
Nigeria is a producer of crude oil, which is sold in dollars. When prices rose in the 1970s, Nigeria experienced a great economic boost. This rise in prices has led to growing interest in Africa in dollar trading; this interest has remained at the forefront of the Nigerian financial sector ever since. This is evident when we look at the number of forex trading accounts opened since 2020. According to reports, forex trading has grown by around 300% since March 2020. The majority of traders’ accounts (60%) come from Africa, Southeast Asia, and Eastern Europe.
What does the future hold?
The continued growth of forex trading in Nigeria will depend on technological innovation and mobile usage and accessibility. However, the future of forex trading is never guaranteed. Like most marketplaces, several factors can influence stock market movements. Forex traders should watch the following indicators when making monetary decisions: unemployment rate, GDP growth, overnight interest rate, consumer price index, and retail sales.
The western world is increasingly aware of Nigeria’s interest and growth in forex trading. However, many may not realize why this upward trend is happening and how it has been a staple of the country’s financial sector since the 1970s.