While much of the world – especially Europe, North America, and Japan – was swept by a retail trading boom in 2020 and 2021, Nigeria was left behind.
Many analysts have noted that Nigerians tend to avoid retail trading to the same extent as those in other countries, which come as a surprise to some, given the high levels of trading in other areas, such as cryptocurrencies. Some have said that this low appetite for online trading is a result of the 2007/8 stock market crash.
Before this, Nigeria had high levels of retail trading among the population. However, the global stock market crash made many Nigerians wary of financial markets and general, leading many to avoid personal trading platforms. However, this might be about to change. Here’s why.
Cryptocurrency loses its allure
As has been pointed out elsewhere, the sudden death of crypto trading is already fueling a strong interest in other assets among Nigerian retail traders. Last year, the Nigerian Central Bank effectively banned crypto trading across the country, citing high levels of risk. Meanwhile, the allure of crypto has faded around the world following the global crash in virtually all leading currencies, meaning that this once-popular Nigerian investment activity no longer holds much appeal.
Wider access to instruments
While some financial assets are off the market, others are making their appeal known. Nigerians now have access to a wider range of assets and instruments, removing barriers to financial markets for many. One representative example here is contracts for difference, or CFDs. These allow anyone to speculate on the price of an asset without owning the underlying asset outright. With CFD trading platforms, Nigerians can gain exposure to blue-chip stocks such as Apple, without paying sky-high prices or going through processes to actually buy the stock itself.
Domestic stocks are high performers
One hidden success story here is the Nigerian stock market itself. While markets in the US and much of Europe have struggled to perform under adverse conditions, this has not been reflected in the domestic market. If we look at the Nigerian Stock Exchange, we can see that the largest listed companies in the country have enjoyed stellar growth throughout 2022, reaching heights that the NASDAQ could only dream of right now. This could certainly help to spur a greater interest in retail trading among Nigerians.
Higher smartphone penetration
We should also be careful not to ignore the technological aspect of this. While Nigeria already had high levels of smartphone penetration relative to neighboring countries, this is currently going into overdrive. For the past few years, smartphone penetration has increased by around 5% per year, the fastest on record. In 2022 we reached a tipping point, with over 50% of Nigerians owning a smartphone for the first time. Since this is the primary technology that most people use to trade and invest online, it makes sense that rising smartphone penetration could give way to a rise in retail trading.
While the future is impossible to predict, the signs are indicating that a retail trading boom could soon be underway in Nigeria. Watch this space to find out.