While the new administration has plans to set Nigeria on a path to economic recovery, Nigerians continue to face inflationary pressures and rising cost of living. According to the National Bureau of Statistics (NBS) report on the Consumer Price Index, Nigeria’s inflation rate rose to an 18-year high of 24.08% in July 2023, increasing by 1.29% from the previous month. Additionally, NBS notes that the food inflation rate also soared from 25.25% in June to 26.98% in July.
The effects of inflation thus urge Nigerians to seek additional sources of income beyond employment, one of which is trading financial instruments like stocks, indices, foreign exchange, and other equities online. As discussed below, technological factors and regulatory developments are reshaping the online trading landscape in Nigeria, allowing retail investors to earn profits and build wealth.
Online brokerages increase profit potential
Compared to traditional brokers, who typically charge service fees and commissions, online brokerages facilitate access to global markets and trading instruments with little to no startup costs. While this accessibility explains why a majority of online investors and traders are from younger generations, online trading platforms also increase profit potential through built-in features. Starting with account creation, users have flexible choices between beginner-friendly, commission-free standard accounts and professional accounts that suit higher-level trading strategies such as those based on algorithms.
Furthermore, online trading platforms can ensure lucrative trading conditions even in periods of high volatility, such as transparent price history and stable spreads in both bull and bear markets. In terms of risk management measures, a reputable online broker can host virtual private servers (VPS) to process transactions safely and efficiently.
Digital payments aid in online trading
Beyond accessible brokerages, the digital payment revolution in Nigeria has also been a key driver in the increase of online traders and investors. To illustrate how widespread digital transactions are in Nigeria, a report from ACI Worldwide found that “the volume of real-time payment transactions in Africa’s biggest economy is projected to hit 8.9 billion in 2027 from 5.1 billion in 2022″. This is why the country ranks 6th among the world’s most developed and sophisticated real-time payment networks, joining economic giants like China and South Korea.
This rapid growth in digital payments can be attributed to how the NIBSS Instant Payment (NIP) system supports instant payments across multiple channels — from mobile apps and online banking to ATM and in-person bank transfers. This fast execution and omnichannel offerings make it easier for traders to deposit funds into their platform accounts and receive payouts during profitable price movements and market conditions.
Regulatory support remains crucial to retail investors
Although technological advancements are pivotal in making online trading a viable income stream in Nigeria, regulatory support through monetary policies and reforms remains crucial to retail investors. For instance, the landmark decision to float the domestic currency naira has resulted in volatile exchange rates. But forex traders, in particular, can look forward to the Central Bank of Nigeria’s upcoming measures to stabilize multiple exchange rate windows and collapse them into the business-based Investors and Exporters window — ultimately improving liquidity in the forex market.
Meanwhile, stock traders can benefit from the recent appointment of Olawale Edun as the Minister of Finance and Coordinating Minister of Economy. Considering Edun is a seasoned stockbroker, his policies are expected to focus on alleviating pain points in equity markets to attract both foreign direct investments and Nigerians who want to expand their investment portfolios through stocks and bonds.
In summary, digital technologies and regulatory support create a synergistic effect on market opportunities and profit levels for Nigerian online traders. However, just as the reliance on these factors heightens, traders must remain vigilant of any changes that may affect the quality and profitability of their trades. Cybersecurity vulnerabilities and online scams may threaten the safety and security of their transactions. At the same time, ever-changing currency values and inflation rates can lead to volatile markets unless stabilized by the government and central bank. Stay tuned to The News Guru for the latest news and updates on business, finance, and the economy.