If the pandemic has taught us anything, it is this: No one can survive with a source of income. It is also unclear to throw your money blindly into any kind of investment. You need something solid, a pan-safe option.
This explains why many young Nigerians take currency trading seriously. It is, after all, the largest and most liquid market in the world. And anyone can shop at any time from the comfort and privacy of their smart gadgets.
Many, however, wonder if it is not counterculture. People cannot quite agree on the morale of earning a living by speculating in the rise of the dollar against the pound sterling or the Nigerian naira.
And if you have a low appetite for risk, you will probably want to be sure that Forex trading is legal in Nigeria. But before we address this concern, let’s look at a brief definition of Forex trading.
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What is Forex trading?
Forex trading is a type of transaction that involves buying and selling currencies.
There are several reasons why people and organizations participate in forex trading, including:
- To earn money.
- To regulate the market.
- To facilitate trade.
- To encourage tourism, etc.
Forex trading has caught on like shots. As I said earlier, many investors give the foreign exchange market a chance, probably because it appears to be pandemic proof.
The main players in the foreign exchange market in Nigeria include:
Central Bank of Nigeria
Central Bank of Nigeria is by far the largest player in foreign exchange trading in Nigeria.
The bank is authorized to draft laws and regulations to regulate and control the other players in the forex market.
Since its inception, the central bank has released so many guidelines depending on current economic conditions.
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Most commercial banks in Nigeria are licensed by the central bank to trade in foreign currency.
Customers in commercial banks, both residents and non-residents, can open and operate domain accounts.
Authorized buyers are corporate bodies and other end-users approved by the central bank to buy currency from the banks.
In an attempt to further liberalize the export sector in Nigeria, the central bank appointed some authorized traders to sell forex to end users.
The oil companies in Nigeria also play a huge role in foreign exchange trading. They earn a lot of foreign currency by selling oil products and selling the same to other forex players in Nigeria.
The Legal Regime of Forex in Nigeria
With the rise in foreign exchange trading and agreements in Nigeria, some are beginning to question the legality of such transactions.
The foreign exchange market in Nigeria is very volatile due to the country’s dependence on oil which is the biggest foreign exchange earnings.
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Due to this volatility, the Nigerian government through the Central Bank apexbank in the country has tried to come up with measures to regulate the sector.
Foreign exchange regulations and laws authorize the Central Bank to develop policies for controlling foreign exchange transactions in Nigeria.
Some of these laws and policies include:
- The Foreign Exchange Control Act of 1962.
- Central Bank of Nigeria Act.
- Banks and Other Financial Institutions Act, 2007.
- Act on currency exchange (control and various provisions).
- Money Laundering Act (Prohibition).
- Second Tier Currency Market 1982.
- Bureau De Change 1989.
- Autonomous Foreign Exchange Market (AFEM) 1995.
- Currency Market (IFEM) 1999.
These laws and regulations authorize the CBN to periodically regulate transactions conducted in foreign currency.
Currency transactions performed by banks and other authorized dealers are well regulated by the Central Bank of Nigeria.
Central bank regulations allow banks and other authorized bodies to engage in foreign exchange trading.
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Online forex transaction in Nigeria is relatively new and no specific rules regulate this division.
However, there is a body called Association of Online Forex Trading Agent in Nigeria.
This body, which is recognized by the government, works with the CBN and other regulatory agencies to come up with a working framework for trade.
That said, local currency traders must comply with applicable laws in order to operate legally in Nigeria.
Many people who now venture into forex do not know how it works. They therefore consult dealers or brokers who take their money and act on their behalf.
In Nigeria, it is illegal to trade in other people’s funds as only licensed brokers are authorized to do so.
Forex traders should also note that forex, like other business transactions, is subject to tax deductions.
The potential for forex trading is huge for everyone involved due to the huge liquidity of the sector. And while it may seem like a bit of a counterculture, it’s not.
The relevant government agencies are working hard to get a comprehensive regulatory framework to control forex trading in Nigeria.
To avoid breaking the law, it is imperative for those who want to venture into forex to take advantage of forex rules.