SEC Proposes N5bn Capital, 30% Local Ownership For Forex Operators

The Securities and Exchange Commission (SEC) is seeking to tighten oversight of Nigeria’s retail forex and Contracts for Difference (CFD) market through proposed rules that would require operators to meet capital thresholds of up to N5bn and ensure at least 30 per cent Nigerian ownership.

The proposed rules are contained in the draft Rules on Online Forex Trading and Contracts for Difference, issued under the Investments and Securities Act (ISA) No. 2, 2025, and published by the Commission.

The framework represents a significant expansion of regulatory oversight for Nigeria’s retail forex market, with the SEC seeking to bring both locally incorporated firms and offshore operators targeting Nigerian residents within a formal licensing and supervisory regime.

Under the proposal, licensed forex brokers would also be required to ensure that at least 30 per cent of their issued and paid-up share capital is held directly and continuously by Nigerian citizens who are directors of the company.

The SEC said the ownership requirement could not be satisfied through nominees, trusts or other arrangements designed to circumvent the rule.

At least two directors, including the Managing Director or Chief Executive Officer, would also be required to be resident in Nigeria.

The proposed capital requirements vary according to the type of operator. Market-making, or B-Book, forex brokers would be required to maintain minimum paid-up capital of N3bn, while their minimum liquid capital would be N2.4bb or 10 per cent of total liabilities, whichever is higher.

STP, ECN or A-Book brokers would face a minimum paid-up capital requirement of N2bn, with minimum liquid capital set at N1.6bn or 10 per cent of total liabilities, whichever is higher.

Technology and platform providers would face the highest capital threshold under the framework, with a proposed minimum paid-up capital of N5bn.

The Commission also proposed separate capital requirements for introducing brokers, with corporate entities required to maintain N150m and individual introducing brokers N30m.

The proposed licensing structure divides the market into three broad categories: Online Forex Broker/Broker Dealer, Introducing Broker, and Technology/Platform Provider.

In addition to capital requirements, operators would be subject to application, processing and registration fees.

The proposed registration fees range from N1m for individual introducing brokers to N30m for technology and platform providers, alongside an application fee of N100,000 and processing fee of N300,000.

A major feature of the proposed framework is its application to offshore operators that actively target Nigerian residents.

The SEC proposes that a foreign broker could come within its regulatory jurisdiction where it identifies Nigeria as a supported country, permits Nigerians to open trading accounts, markets its services directly to Nigerian residents through local affiliates or influencers, or maintains representatives or customer-support channels in Nigeria.

The proposed approach could significantly alter how international online forex platforms operate in the Nigerian market, as offshore status alone would not necessarily shield an operator from SEC oversight if its activities are directed at Nigerian residents.

The draft rules also seek to strengthen safeguards around client funds. Licensed operators would be required to keep clients’ money in segregated accounts maintained with banks licensed by the Central Bank of Nigeria.

The accounts would have to be reconciled daily, with relevant records retained for at least seven years.

The SEC has further proposed leverage limits for retail traders, setting the maximum at 1:400 for major currency pairs and 1:300 for minor and exotic currency pairs as well as CFDs on indices and commodities.

Cryptocurrency-related CFDs would face a much lower retail leverage limit of 1:2, while eligible professional clients could access leverage of up to 1:1,000, subject to prescribed conditions.

Retail clients would also be entitled to negative-balance protection, while brokers would be required to automatically close positions when a client’s equity falls to 50 per cent or less of the required margin.

The draft rules would also restrict trading involving the naira. Brokers would be prohibited from offering, marketing or facilitating trading in currency pairs involving the naira without prior approval from the SEC.

To improve transparency, CFD brokers would be required to submit a Daily Price Spread Report to the Commission by 10:00 a.m. West African Time on the next business day.

The SEC is also proposing greater disclosure of retail trading outcomes.

Brokers would be required to disclose monthly the percentage of their retail clients who lose money from trading activities.

Advertising and promotional activities would face tighter controls, with brokers required to submit advertisements and influencer promotions to the Commission for approval.

The proposed rules would prohibit a number of promotional and trading practices, including bonuses, trading contests, referral incentives and the Percentage Allocation Management Model (PAMM). Binary options would also be prohibited for retail clients.

Technology and platform providers would face additional operational and cybersecurity obligations. The draft framework proposes a minimum platform uptime of 99.5 per cent, alongside requirements for end-to-end encryption and multi-factor authentication.

Operators would also be required to notify the SEC of material cybersecurity incidents within 24 hours, reflecting the regulator’s focus on technology and operational risks associated with online retail trading.

The framework further provides for the establishment and funding of an Investor Protection Fund by regulated entities in accordance with the ISA 2025.

The SEC’s proposed framework comes as online forex and CFD trading continues to attract retail investors through digital platforms, social media promotions and technology-driven brokerage services.

By imposing higher capital requirements, local ownership conditions, client-protection measures and direct oversight of offshore platforms, the Commission is seeking to establish clearer accountability for firms operating in or targeting the Nigerian market.

The draft rules, if adopted, would therefore raise the regulatory and financial requirements for market participants while placing greater emphasis on investor protection, transparency, operational resilience and the ability of regulators to supervise platforms serving Nigerian retail traders.