The forex market experiences a rapid growth in Africa today. Does the regulation keep up with the trend?

Forex Regulation in Africa

In the last two decades, technologies, especially mobile devices and the internet have played significant roles to boost forex trading in any part of the globe. Africa is no exception to this. Once forex gets noticed, there is no going back.Today, the African forex market is very competitive and dynamic.

There are about 1.3 million forex traders in Africa, with South Africa and Nigeria making up the majority. Other countries with big participants include:

  1. Kenya
  2. Egypt
  3. Angola
  4. Namibia
  5. Tanzania.

Recently, the market has drawn the attention of international brokers such as:

In short, forex trading is legal in several countries in Africa. Lately, governments have started to give more attention to the industry and monitor trading activities in their respective countries. Let's see which countries are friendly towards forex and which are not.

 

Forex Regulation in South Africa

African countries such as Nigeria, South Africa, Egypt, Kenya, Namibia, Ivory Coast, and many more are forex-friendly, but naturally, there are minor restrictions from the government.

Forex brokers must hold a license before running their business in any of these countries. The status of forex trading in these countries is still unclear; it is not yet legalized but not against the law.

The South African Financial Sector Conduct Authority (FSCA), previously known as Financial Services Board (FSB), is one of the most well-known forex regulatory bodies.

The FSCA is arguably the best regulator across the continent. Its responsibility primarily lies in overseeing all financial activities in South Africa, including the forex market.

The FSCA must regulate forex brokers before they are allowed to offer their services to South Africans. To minimize unscrupulous activities, brokers must also report all trades.

The regulator seeks to promote fair competition between brokers. The FSCA is expected to mediate the parties involved if a conflict arises.

For South African forex traders, a license from the FSCA is likely a sign of reliable brokers. The FSCA-regulated brokers have a reputation for treating their customers fairly and helping educate them about finance. Should traders feel they have become victims of fraudulent activity, they can file a report to the FSCA.

 

Forex Regulation in Kenya

The Capital Markets Authority (CMA) is the financial regulatory body in Kenya. Registration to the CMA is required for forex brokers wanting to operate their business there. In creating their own framework, the CMA takes notes from established financial regulators such as the Australian Securities and Investment Commission (ASIC) and the United Kingdom's Financial Conduct Authority (FCA).

Although the CMA was established in 1989, it was not until 2016 that the government granted the CMA the power to monitor forex trading. Before this, the market was full of scams committed by unregulated brokers. Today, thanks to the Financial Act of 2016, forex trading is more secure and transparent in Kenya.

 

Forex Regulation in Nigeria

The forex market in Nigeria is not illegal, although it is still not heavily regulated. This is perhaps because it is still relatively new to the country.

To engage in trading activities, brokers only need to meet certain criteria set by Nigeria's apex bank, the Central Bank of Nigeria (CBN). In fact, many local brokers can register themselves as your usual business.

As of today, most Nigerians prefer to trade forex with foreign brokers who they deem to be more trustworthy. Undeniably, this phenomenon arises from the lack of forex regulation in the country. Trustworthiness aside, traders must be prepared to take all the risks should things turn ugly.

Forex traders in Nigeria also have to endure other disadvantages caused by the lack of regulation. For example, some Nigerian banks may decline to fund deposits or withdrawals from trading platforms.

As the popularity of forex trading keeps on rising, however, it is expected that the CBN, together with the Securities Exchange Commission (SEC), will soon introduce forex regulation to the country and give it a full legal status.

 

Final Words

The future of forex in Africa is very promising. The popularity will only rise thanks to the repeated exposure of forex trading on internet advertisements, newspapers, TVs, and other media. Many seminars, classes, and programs are also held to facilitate the growth. In fact, successful stories of African traders have emerged in mainstream media to inspire a lot of beginners to try.

More foreign forex brokers will not sit still and let the opportunity of expanding their reach pass. This will provide traders with a wide range of brokers to choose from. As more people invest their money in forex trading, the governments too will not remain still. As is the case with Kenya, more countries will create proper forex regulations that will benefit all parties involved.