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

First, What the Draft Gets Right

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 Negative Balance Protection Negative Balance Protection is a term and process adopted by forex brokers and financial regulators to protect investors and traders from excessive losses. Negative Balance Protection is not a marketing term but an actual service provided in investing and trading. This ensures that traders with losing positions don't end up with a negative balance in their forex trading account. If you find yourself in a bad trade and are losing money fast, a margin call can save you from going into debt. Befor Negative Balance Protection is a term and process adopted by forex brokers and financial regulators to protect investors and traders from excessive losses. Negative Balance Protection is not a marketing term but an actual service provided in investing and trading. This ensures that traders with losing positions don't end up with a negative balance in their forex trading account. If you find yourself in a bad trade and are losing money fast, a margin call can save you from going into debt. Befor Read this Term, 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 Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term, 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.

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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.