The Securities and Exchange Commission has proposed new rules to bring online forex and Contracts for Difference platforms under Nigeria’s capital-market regulatory framework, with the measures potentially raising operating costs and triggering consolidation among market players.
Under the proposal, forex brokers operating on their own account would require a minimum N3bn capital, while those connecting clients directly to the market would need N2bn. Technology and platform providers would require N5bn, while introducing brokers would face capital requirements of N30m for individuals and N150m for companies.
The rules would also apply to offshore platforms targeting Nigerian investors through account services, advertising, affiliates or local representatives.
For retail investors, the SEC is proposing negative-balance protection, ensuring traders cannot lose more than the funds in their accounts.
Leverage would also be capped at 1:400 for major currency pairs, 1:300 for minor and exotic pairs, indices and commodities, and 1:2 for cryptocurrencies. Retail participation in binary options would be prohibited.
Brokers that breach certain leverage restrictions or fail to provide negative-balance protection could face penalties starting at N1m per affected client.
The proposed rules could also reshape how forex platforms attract Nigerian customers.
Operators would be restricted from using unapproved influencers or making misleading claims about trading performance without appropriate risk disclosures. Cold-calling retail clients who have not previously expressed interest would also be prohibited.
The move could affect the wider network of affiliates, introducing brokers and social-media promoters that currently play a role in connecting traders with online forex platforms.
The SEC proposes requiring brokers to keep client funds separate from their own money in accounts with banks licensed by the Central Bank of Nigeria.
Operators would also be required to reconcile client accounts daily and maintain records for at least seven years.
Technology and platform providers would face cybersecurity requirements, including encryption, multi-factor authentication and regular security testing, as well as a proposed 99.5 per cent minimum uptime during trading hours.
The proposed requirements could raise the cost of operating in Nigeria and make it difficult for smaller brokers and platforms to remain competitive.
Offshore operators would also have to determine whether obtaining local registration and meeting the proposed requirements is commercially viable.
The SEC said the proposal is currently open for public comments and is not yet effective. If adopted, existing operators would have three months to apply for registration and six months to achieve full compliance.
The framework could ultimately leave Nigeria with fewer but better-capitalised and more closely supervised online forex and CFD operators, while giving investors greater regulatory protection.
