On the 1st of September, the
Nigerian Securities and Exchange Commission published its proposed rules on
online forex trading and contracts for difference, issued under the Investments
and Securities Act No. 2 of 2025. The trade press has largely settled on a
single verdict, and it is not positive.
London’s trading industry is coming home!
I understand the reaction.
Having read the draft as a licensing practitioner rather than as a commentator,
however, I do not think the framework is incoherent. It is a recognisable
regulatory design, executed at the wrong price, containing one structural
dependency that will prevent it from operating at any price.
Both problems are fixable,
and comments are due to the Rules Committee within two weeks of exposure, which
is why this is worth saying quickly rather than saying well.
Read more: Nigeria Axes Binary Options In New FX and CFD Rules
The Commission distinguishes
between B-book and A-book models and uses that vocabulary openly, which is
considerably more candid than most rulebooks. Negative balance protection ,
mandatory close-out at 50% of required margin, segregation of client funds with
banks licensed by the Central Bank of Nigeria, daily reconciliation and monthly
disclosure of the proportion of losing retail accounts are all sound and
unremarkable.
The marketing provisions are
the strongest part of the document.
Bans on unapproved
affiliates and influencers, on volume-based bonuses and rebates, on cold
calling absent a prior relationship, and on the display of a lifestyle implied
to have been funded by trading address the actual mechanism of retail harm in
this market more directly than any European rule I have read.
The last of those will be
described as overreach. It is not. It is the closest a regulator has yet come
to naming what actually converts a Nigerian retail account.
The Inversion with the EU
Europe restricted the
product and left the door comparatively, to Nigeria’s proposal, ‘cheap’. ESMA’s
2018 intervention, since made permanent in national law across the EU, caps
retail leverage at 1:30 on major pairs, while a Cypriot investment firm dealing
on its own account requires €750,000 of initial capital. Nigeria has done the
reverse.
The draft permits retail
leverage of 1:400 on major pairs, 1:300 on minors, indices and commodities, 1:2
on cryptocurrencies , and up to 1:1,000 for clients who qualify as professional,
figures that would be unlawful in the European Union.
It then prices entry at 3
billion naira ($2.2 million) of paid-up capital for a market-making broker and 2 billion ($1.5 million) for a
straight-through-processing or ECN model. The logic is defensible and arguably
honest: if a firm wishes to sell a risky product, it should capitalise that
balance sheet. Nigeria has chosen to put its constraint on the firm rather than
on the trade.
Where the Price
Goes Wrong
Capital requirements are
ultimately priced against expected loss, and expected loss is a function of the
client money at risk behind the firm.
Three billion naira is
approximately $2.2 million, and the 5 billion naira applied to technology providers
is close to $3.8 million. Only a small number of jurisdictions sit higher, and
each of them serves a client base whose average balances are a multiple of
Nigeria’s.
The ratio of required
capital to client money at risk under this draft is therefore likely to be
among the highest anywhere. That is not investor protection, and I do not think
it is presented in good faith as such.
Capital thresholds are the
cheapest available proxy for supervisory capacity, and a commission that cannot
realistically supervise 40 firms can supervise four. That is a legitimate
choice, and the Commission would be better served by stating it than by dressing
it as prudential calibration. The failure mode is well established.
The alternative to a
licensed Nigerian broker is not the absence of a broker. It is the same
offshore broker, reached through a virtual private network, introduced by an
affiliate on WhatsApp and funded in stablecoin.
Nigerian retail traders are
among the most resourceful in the world at obtaining access. Price licensing
beyond commercial reach, and you do not reduce the trading; you remove the
recourse.
The Dependency
Nobody Has Sequenced
The most consequential
provision has received the least attention. Technology and platform providers
are brought inside the perimeter at 5 billion naira ($3.8 million) of paid-up capital, a 30
million naira ($22.6k) registration fee, a fit and proper assessment of vendor owners,
and a 99.5% uptime obligation.
Read that alongside the
requirement that a registered entity be incorporated in Nigeria with 30% of its
shares held by Nigerian citizens who also serve as directors, with any
structure designed to circumvent the rule expressly prohibited. Then ask which global
platform vendor will incorporate locally, capitalise at close to $4 million and
surrender 30% of that entity for a market of this size. My answer is that none
will.
If no vendor registers, the
broker categories become unusable, because a broker that has raised 3 billion
naira ($2.2 million) still cannot lawfully operate on an unregistered platform.
The framework contains an
internal dependency that has not been sequenced, and this is the single
amendment that matters most. The remedy is unremarkable and already standard:
regulate the outsourcing rather than the vendor.
Make the licensed broker
accountable for the technology it uses, with contractual audit and access
rights, exit planning and business continuity obligations, which is the
architecture the European outsourcing regime under MiFID II and its Cypriot
implementation has applied for years.
The Commission then draws
its assurance from the entity it can actually supervise.
The Reporting
Field That Will Cause the Most Damage
Every broker would file a
daily price spread report by 10 o’clock West African Time on the following
business day, covering opening and closing prices, the highest, lowest and
weighted average spread, and the details of any period of widened or abnormal spread,
including start time, end time and reason.
The first three are
mechanical, and any broker unable to produce them from its own tick data has a
more serious problem than this rule. The fourth is a different animal, and I am
saying this from our regulatory compliance expertise and experience.
A free-text reason field,
completed daily under time pressure by whoever is available, is not
automatable, is inherently subjective, and creates a permanent contemporaneous
record that will be read back with hindsight in any future enforcement action.
It will become one of the least reliable documents in the file and one of the
most damaging.
Exception-based reporting
achieves the same supervisory outcome: file the data daily in machine-readable
form, file an explanation only where a defined threshold is breached, and allow
the Commission to query anything else. The explanation is then written once,
carefully, at the moment it matters.
One Separation
Worth Asking For
The 30% local ownership
requirement and the resident director obligations are industrial policy.
Nigeria is entitled to an industrial policy, and many jurisdictions pursue it.
The difficulty is that placing it inside the same instrument as investor
protection makes the draft hard to answer constructively, because a firm
objecting to the ownership rule appears to be objecting to client money
segregation.
Localisation belongs in a
transition schedule with a stated timeline, separated from the prudential and
conduct provisions so that each can be argued on its own terms.
This is a consultation and a
first framework, and the Commission has allowed two weeks from exposure for
comments to be sent to its Rules Committee. Two weeks, however, is short for a
document of this reach, and an extension is itself a reasonable thing to ask
for. What is unreasonable is the industry’s habitual response: publish
criticism, file nothing, and then object when the final rules arrive unchanged.
Firms with Nigerian client
books and the platform vendors who serve them should write to the Rules
Committee this week. A first draft is the only point at which regulation is
still cheap to change.
On the 1st of September, the
Nigerian Securities and Exchange Commission published its proposed rules on
online forex trading and contracts for difference, issued under the Investments
and Securities Act No. 2 of 2025. The trade press has largely settled on a
single verdict, and it is not positive.
London’s trading industry is coming home!
I understand the reaction.
Having read the draft as a licensing practitioner rather than as a commentator,
however, I do not think the framework is incoherent. It is a recognisable
regulatory design, executed at the wrong price, containing one structural
dependency that will prevent it from operating at any price.
Both problems are fixable,
and comments are due to the Rules Committee within two weeks of exposure, which
is why this is worth saying quickly rather than saying well.
Read more: Nigeria Axes Binary Options In New FX and CFD Rules
The Commission distinguishes
between B-book and A-book models and uses that vocabulary openly, which is
considerably more candid than most rulebooks. Negative balance protection ,
mandatory close-out at 50% of required margin, segregation of client funds with
banks licensed by the Central Bank of Nigeria, daily reconciliation and monthly
disclosure of the proportion of losing retail accounts are all sound and
unremarkable.
The marketing provisions are
the strongest part of the document.
Bans on unapproved
affiliates and influencers, on volume-based bonuses and rebates, on cold
calling absent a prior relationship, and on the display of a lifestyle implied
to have been funded by trading address the actual mechanism of retail harm in
this market more directly than any European rule I have read.
The last of those will be
described as overreach. It is not. It is the closest a regulator has yet come
to naming what actually converts a Nigerian retail account.
The Inversion with the EU
Europe restricted the
product and left the door comparatively, to Nigeria’s proposal, ‘cheap’. ESMA’s
2018 intervention, since made permanent in national law across the EU, caps
retail leverage at 1:30 on major pairs, while a Cypriot investment firm dealing
on its own account requires €750,000 of initial capital. Nigeria has done the
reverse.
The draft permits retail
leverage of 1:400 on major pairs, 1:300 on minors, indices and commodities, 1:2
on cryptocurrencies , and up to 1:1,000 for clients who qualify as professional,
figures that would be unlawful in the European Union.
It then prices entry at 3
billion naira ($2.2 million) of paid-up capital for a market-making broker and 2 billion ($1.5 million) for a
straight-through-processing or ECN model. The logic is defensible and arguably
honest: if a firm wishes to sell a risky product, it should capitalise that
balance sheet. Nigeria has chosen to put its constraint on the firm rather than
on the trade.
Where the Price
Goes Wrong
Capital requirements are
ultimately priced against expected loss, and expected loss is a function of the
client money at risk behind the firm.
Three billion naira is
approximately $2.2 million, and the 5 billion naira applied to technology providers
is close to $3.8 million. Only a small number of jurisdictions sit higher, and
each of them serves a client base whose average balances are a multiple of
Nigeria’s.
The ratio of required
capital to client money at risk under this draft is therefore likely to be
among the highest anywhere. That is not investor protection, and I do not think
it is presented in good faith as such.
Capital thresholds are the
cheapest available proxy for supervisory capacity, and a commission that cannot
realistically supervise 40 firms can supervise four. That is a legitimate
choice, and the Commission would be better served by stating it than by dressing
it as prudential calibration. The failure mode is well established.
The alternative to a
licensed Nigerian broker is not the absence of a broker. It is the same
offshore broker, reached through a virtual private network, introduced by an
affiliate on WhatsApp and funded in stablecoin.
Nigerian retail traders are
among the most resourceful in the world at obtaining access. Price licensing
beyond commercial reach, and you do not reduce the trading; you remove the
recourse.
The Dependency
Nobody Has Sequenced
The most consequential
provision has received the least attention. Technology and platform providers
are brought inside the perimeter at 5 billion naira ($3.8 million) of paid-up capital, a 30
million naira ($22.6k) registration fee, a fit and proper assessment of vendor owners,
and a 99.5% uptime obligation.
Read that alongside the
requirement that a registered entity be incorporated in Nigeria with 30% of its
shares held by Nigerian citizens who also serve as directors, with any
structure designed to circumvent the rule expressly prohibited. Then ask which global
platform vendor will incorporate locally, capitalise at close to $4 million and
surrender 30% of that entity for a market of this size. My answer is that none
will.
If no vendor registers, the
broker categories become unusable, because a broker that has raised 3 billion
naira ($2.2 million) still cannot lawfully operate on an unregistered platform.
The framework contains an
internal dependency that has not been sequenced, and this is the single
amendment that matters most. The remedy is unremarkable and already standard:
regulate the outsourcing rather than the vendor.
Make the licensed broker
accountable for the technology it uses, with contractual audit and access
rights, exit planning and business continuity obligations, which is the
architecture the European outsourcing regime under MiFID II and its Cypriot
implementation has applied for years.
The Commission then draws
its assurance from the entity it can actually supervise.
The Reporting
Field That Will Cause the Most Damage
Every broker would file a
daily price spread report by 10 o’clock West African Time on the following
business day, covering opening and closing prices, the highest, lowest and
weighted average spread, and the details of any period of widened or abnormal spread,
including start time, end time and reason.
The first three are
mechanical, and any broker unable to produce them from its own tick data has a
more serious problem than this rule. The fourth is a different animal, and I am
saying this from our regulatory compliance expertise and experience.
A free-text reason field,
completed daily under time pressure by whoever is available, is not
automatable, is inherently subjective, and creates a permanent contemporaneous
record that will be read back with hindsight in any future enforcement action.
It will become one of the least reliable documents in the file and one of the
most damaging.
Exception-based reporting
achieves the same supervisory outcome: file the data daily in machine-readable
form, file an explanation only where a defined threshold is breached, and allow
the Commission to query anything else. The explanation is then written once,
carefully, at the moment it matters.
One Separation
Worth Asking For
The 30% local ownership
requirement and the resident director obligations are industrial policy.
Nigeria is entitled to an industrial policy, and many jurisdictions pursue it.
The difficulty is that placing it inside the same instrument as investor
protection makes the draft hard to answer constructively, because a firm
objecting to the ownership rule appears to be objecting to client money
segregation.
Localisation belongs in a
transition schedule with a stated timeline, separated from the prudential and
conduct provisions so that each can be argued on its own terms.
This is a consultation and a
first framework, and the Commission has allowed two weeks from exposure for
comments to be sent to its Rules Committee. Two weeks, however, is short for a
document of this reach, and an extension is itself a reasonable thing to ask
for. What is unreasonable is the industry’s habitual response: publish
criticism, file nothing, and then object when the final rules arrive unchanged.
Firms with Nigerian client
books and the platform vendors who serve them should write to the Rules
Committee this week. A first draft is the only point at which regulation is
still cheap to change.
