Is forex trading in Nigeria legal?

Yes, it is. As long as you are doing it for yourself only and using a properly licensed broker.

The foreign exchange market is regulated in many countries. Such regulation can make trading safer for customers, but over regulation hinders the smooth running of the market and hurts competition.

Online forex trading in Nigeria is relatively new and somewhat unregulated. The Central Bank of Nigeria (CBN) regulates foreign exchange trading activities. The Bank allows foreign exchange trading as long as it is carried out through banks or registered brokerage firms. The rather dense Foreign Exchange (Monitoring and Miscellaneous Provisions) Act of 1995 can be found here. It is supplemented by the November 2006 foreign exchange manual.

Over the years, we have seen the influx of foreign forex brokerage firms in Nigeria but most of the brokers we recommend either have, or will soon have, a physical presence in Nigeria. The list is refreshed periodically, and a licensed broker in 2014 could be delicensed in 2015 if it fails to meet certain requirements. Brokers will normally indicate their regulatory status on their websites and you can visit the various regulatory bodies to check your brokers’ status. The most commonly used are:

The presence of so many forex brokers in Nigeria doesn’t in itself legalize online forex trading, but does reflect the widespread nature of the activity. These brokerage firms have ramped up the popularity of the trade in Nigeria, but there’s still a huge gap in the form of regulation.

Recent tightening in the banking policy in Nigeria has affected online forex trading. A new CBN directive limits overseas spending on the naira debit cards to $50,000 annually, and therefore limits how much a client can deposit unto his trading account unless he/she has other forex sources.

There are no specific rules governing online foreign exchange trading in Nigeria. It is not illegal, but we have seen bodies like the Association of Online Forex Trading Agents, an assemblage of online forex brokerage firms in Nigeria, engaging government to design a working regulatory framework for the business. This will be a big confidence boost for local forex traders.

Such activities are already yielding results. Some of the group’s representatives were invited for a meeting by a combined team of CBN and SEC (Securities and Exchange Commission) to discuss regulation of online forex trading. It is likely that regulation will attract more institutional investors into the forex industry in Nigeria. Please refer here:

Importantly, it is illegal to manage other people’s funds through your broker without being licensed as a money manager by your country’s regulator, in this case being the CBN.

Finally, earnings from forex trading are taxable, but not subject to any specific withholding tax deductions. However, every Nigerian is expected to file an annual Personal Income Tax Return. Online forex trading profits are treated as Capital Gains Tax chargeable at the rate of 10%.