Which is more profitable to trade in Nigeria, forex or bitcoin?

Bitcoin trading involves speculation on the price movements of BTC via CFD trading accounts. It involves buying and selling Bitcoin via any reliable crypto exchange. Forex trading, on the other hand, is a process of converting one currency to another or trading different foreign currencies. Both forms of trading are done with the same goal of earning a profit. 

Forex trading in Nigeria was liberalized back in 1995 with the establishment of an Autonomous Foreign Exchange Market (AFEM). Several experts, including the famous investor George Soros, believe that Nigeria is one of the leading countries in terms of the fastest growing middle class with an accessible and decentralized nature of the forex market connecting Nigerian traders with the other parts of the world through forex and Bitcoin trading. The population is also becoming increasingly tech-savvy, engaging in trading activities on online platforms to earn profits. This article aims to look into the difference between forex trading and bitcoin trading in Nigeria and provide tips for making successful forex and Bitcoin trades in the country.

Forex Trading in Nigeria

Loosely speaking, forex trading involves buying one fiat currency and selling another at an exchange rate that fluctuates every second based on market demand and supply. Currencies are traded in the forex market, open 24 hours a day, five days a week. Forex trades are conducted on OTC (over-the-counter) platforms, meaning there are no physical exchanges like in stock trading platforms. 

Based on data provided by the World Bank, Nigeria is considered to be the main regional player in West Africa. With almost 202 million people, the youth population in Nigeria is one of the largest in the world. Forex trading in the country has become extremely popular in the last decade, owing to economic growth and surplus natural resources. The burgeoning Nigerian middle class has acknowledged the benefits of trading in currency pairs, leading to the establishment of a cadre of reliable forex brokers to provide a platform for Nigerian traders. 

There are over 300,000 forex traders in Nigeria, and more citizens are likely to join the forex market as regulations become less stringent. It is completely legal to participate in forex trading since the forex trading exchanges are regulated by the government, and therefore, they have to comply with the rules and regulations laid down by the national regulator, the Central Bank of Nigeria (CBN). The regulator sets the guidelines for forex brokers to protect the traders and make profits from trading taxable. 

Some of the benefits of forex trading in Nigeria include the following – 

• Affordable entry to forex and other financial markets
• Access to high liquidity
• Support for both short and long positions

The disadvantages of forex trading in Nigeria include the following – 

• High risk of financial losses
• Complicated pricing method
• Highly volatile in nature

To have the best forex trading experience without worrying about the security of funds, traders can look into the list of forex brokers in Nigeria mentioned below –

• Tickmill
• FBS
• Exness

Bitcoin Trading in Nigeria

Bitcoin trading involves buying and selling BTC tokens via a crypto exchange by creating a trading account. The Bitcoin market is completely decentralized, meaning the transactions are not backed or issued by any central authority like the government. BTC run across the blockchain network, are bought and sold through exchanges, and stored in digital wallets. Unlike traditional fiat currencies, Bitcoin and other major cryptocurrencies exist as digital records and are stored on the blockchain network when a trader wants to transfer crypto units. 

In 2021, CBN (the Central Bank of Nigeria) barred all financial institutions in the country from getting into Bitcoin-related activities. This made crypto trading with Bitcoin, Ethereum, and other digital assets a big challenge for traders. To avoid digital trading assets illegally, Nigerian traders need to register on legal peer-to-peer Bitcoin exchanges to place their trades. It is evident that the country has a distrust in the adoption and use of cryptocurrencies like Bitcoin as an exchange tool. However, despite this distrust and cryptocurrencies not being recognized as a form of exchange or legal tender, it is not exactly illegal to trade Bitcoin since there are no laws or legislations containing provisions that criminalize the use of BTC for trading. 

Some of the advantages of Bitcoin trading in Nigeria include the following –

• The highly volatile market brings higher profits
• A transparent Bitcoin market keeps traders informed
• Decentralized transactions give anonymity and control to traders.

The disadvantages of Bitcoin trading in Nigeria include the following – 

• The highly volatile market brings higher losses
• Lack of proper knowledge and understanding of how the Bitcoin market and exchanges work

To make legal trades using Bitcoin and other cryptocurrencies, traders can use any one of the following Bitcoin exchanges in Nigeria – 

• Paxful
• Luno
• Kraken

Comparison between Forex and Bitcoin Trading in Nigeria

Forex and Bitcoin trading in Nigeria has several similarities and differences. The general mechanics driving the valuations of fiat and Bitcoin include market demand and supply. However, the specific driving forces are substantially different for forex and Bitcoin. For instance, Bitcoin is run on the blockchain, which involves a decentralized and distributed ledger, whereas forex trading is conducted based on fundamental and technical analysis. 

One major difference lies in the volatility of the two markets – the Bitcoin market is substantially more volatile than the FX market. In terms of market capitalization, forex trading is a well-established market with well-designed mechanisms and systems that have been in place for a long time. Bitcoin trading started recently, only a decade ago. In terms of market participants, Bitcoin trading started off with only a few retail traders, whereas forex trading was reserved for large institutions like banks. 

Coming to the risks involved in forex and Bitcoin trading, first, exchange rates on various exchanges may considerably vary. While receiving deposits in Bitcoin, there may be an exposure to Bitcoin-to-USD rate risk. Second, the danger of volatility is common in both forms of trading. Historically, BTC prices have exhibited extreme volatility, higher than fiat currency pairs. The absence of regulation results in the volatile nature of digital currencies, which Nigerian traders and brokers can use to their advantage. Leverage risk is another type of risk for forex and Bitcoin traders, especially those who are new and unaware of the exposure. This form of risk is not unique to Bitcoin trading as it comes into play in forex trading as well.

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Tips for Successful Forex or Bitcoin Trading in Nigeria

Whether it is forex or Bitcoin trading, Nigerian traders must understand what they are getting into before putting real money into the trading platforms. Here are a few basic tips to consider before starting to trade in foreign currencies and cryptocurrencies – 

• Avoid unreasonable expectations – Forex and Bitcoin markets are highly liquid. This requires traders to set realistic goals and keep greed and fear out of all equations.
• Define a well-designed trading strategy– Success in forex and Bitcoin trading is decided by the traders alone. One essential step to making successful trades is to set a clear-cut goal that helps traders make calculated moves to reach the ultimate goal of making profits.
• Understand market trends – Nigerian traders must always learn the technicalities first, like liquidity mining, decentralized finance, blockchain system, staking, currency pairs, exchange rate, and more, in order to broaden the scope of knowledge. It is also important to understand technical and fundamental analysis while trading foreign currencies and Bitcoin.
• Select a reliable trading platform – Trading platforms for forex or crypto trading are thousands in number that facilitate trading activities seamlessly. Traders must choose licensed and registered platforms to avoid being trapped in a fraud case.
• Allocate trades and investments accordingly – While beginning to trade in forex and Bitcoin, it is important to allocate investment securely. Instead of investing all the funds at once, it is better to set up a risk-adjusted approach that ensures the traders do not suffer unnecessary heavy losses.

Conclusion

Trading in foreign and digital currencies in Nigeria is an excellent way of earning money. Despite the strict regulation on forex trading and the ban on crypto trading, the activities have grown exponentially, the latter by almost 17%. Forex and Bitcoin trading has key similarities as well as differences, and hence, traders must be aware of the ins and outs of both forms of trading before deciding to participate in any one of the markets. 

For Nigerian traders, especially those with a limited amount of money, forex trading is more suitable than crypto trading. Keep your focus on the understanding of technical analysis, fundamental analysis, and a close eye on the forex and crypto market to make the most informed and profitable decision.