For decades, Nigeria’s capital markets have wrestled with two stubborn enemies of investor confidence: insider trading and market manipulation. Both erode trust, distort prices, and scare away the very capital needed to fuel growth. While regulations exist — and enforcement agencies like the Securities and Exchange Commission (SEC) and the Nigerian Exchange (NGX) have stepped up oversight — manual detection methods are struggling to keep pace with the speed and complexity of today’s trading environment.
Now, a new player is entering the arena: artificial intelligence (AI)-powered market surveillance. And if done right, it could change the game entirely.
Market abuse thrives on speed, asymmetry of information, and complexity. In Nigeria, where the volume of trades is growing and digital trading platforms are proliferating, it’s increasingly easy for illicit actors to hide in the noise.
Insider trading — where someone uses non-public information to make unfair gains — remains notoriously difficult to prove. Market manipulation, which can include practices like “pump and dump,” false rumours, or wash trading, often leaves only subtle traces. Traditional monitoring tools rely heavily on historical data and human analysts, meaning they may only catch misconduct after the fact — sometimes weeks or months later.
As the Nigerian market becomes more integrated with global flows, the problem intensifies. International actors, offshore accounts, and algorithmic trading systems add layers of complexity that legacy monitoring systems weren’t built to handle.
Artificial intelligence offers something the traditional systems can’t: real-time, pattern-based detection at scale.
AI-powered surveillance platforms can:
- Process millions of trades in milliseconds – identifying unusual price movements, abnormal volumes, or suspicious order patterns almost instantly.
- Spot hidden correlations – connecting seemingly unrelated transactions across brokers, accounts, or even exchanges.
- Learn and adapt – improving detection accuracy as they’re fed more market data, including historic cases of misconduct.
- Analyse unstructured data – scanning news reports, social media posts, and even corporate disclosures to identify rumours or leaks that might precede suspicious trading.
In a country where stock tips can spread in WhatsApp groups before official announcements hit the NGX disclosure portal, AI’s ability to scan multiple channels for early warning signs is a critical advantage.
Global inspiration, local adaptation
Globally, markets from the U.S. to Singapore already use AI-based surveillance to combat abuse. Nasdaq’s SMARTS Market Surveillance system, for example, combines advanced analytics with pattern recognition to detect anomalies across markets.
For Nigeria, the opportunity isn’t just to import these tools — it’s to customise them for local trading behaviour and regulatory realities. For example:
- AI models could be trained on historical NGX trading data, including confirmed cases of insider trading or manipulation.
- Systems could incorporate unique Nigerian market signals, like the impact of CBN monetary policy announcements, FX scarcity news, or the trading spikes that sometimes follow government contract awards.
- Language models could be tuned to detect financial rumours in Nigerian Pidgin, Yoruba, Igbo, and Hausa on social media.
This localisation is essential. AI isn’t magic — it’s pattern recognition. The patterns in Lagos may not be the same as in London or New York.
Regulatory and ethical considerations
AI can be a powerful ally, but it also raises big questions for regulators and market participants.
- Data Privacy: Surveillance systems need vast amounts of trading and communications data. How that data is stored, anonymised, and accessed will be crucial to maintaining trust.
- Transparency: AI algorithms can be “black boxes,” making it hard to explain exactly why a trader was flagged. Nigerian regulators will need to ensure there are clear audit trails and human oversight.
- False Positives: A wrongly flagged trader can suffer reputational harm. AI systems must be tested rigorously to minimise mistakes.
The SEC Nigeria will need to develop guidelines for how AI-generated alerts translate into investigations and sanctions, ensuring due process is upheld.
Boosting investor confidence
If implemented well, AI-powered market surveillance could have a profound effect on Nigeria’s capital market.
- Deterrence: Knowing that every trade is being monitored by a system capable of spotting subtle patterns could discourage would-be manipulators.
- Faster enforcement: Real-time detection means regulators can freeze suspicious trades before the damage spreads.
- Attracting foreign capital: Global institutional investors care deeply about market integrity. Demonstrating that Nigeria uses cutting-edge surveillance can help improve its perception as a safe place to invest.
In other words, AI surveillance is not just a regulatory tool — it’s a branding tool for the market.
Building such a system won’t be simple. It requires:
- Investment in infrastructure – High-speed data feeds, secure storage, and cloud computing resources.
- Capacity building – Training analysts, regulators, and compliance officers to work alongside AI tools.
- Public-private collaboration – The NGX, SEC, fintechs, and banks must share data and align on protocols.
- Policy support – Clear regulations on AI use, data privacy, and cross-border data flows.
The good news is that Nigeria already has a growing ecosystem of fintech and AI talent. Startups could play a major role in building localised models, while global vendors could bring proven frameworks.
The fight against insider trading and market manipulation is, at its heart, a fight for fairness. Artificial intelligence won’t eliminate bad actors overnight, but it gives Nigeria’s regulators and market operators a sharper, faster, and more adaptive tool to level the playing field.
In the coming years, as AI becomes embedded in Nigeria’s market infrastructure, the most powerful message to investors might be this: If you try to cheat, the system will see you — before anyone else does.
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Olusegun Afolabi has a first degree in biochemistry from the University of Ilorin, Nigeria, and a master’s in computer science from Hertfordshire University in the United Kingdom. He is an AWS solutions architect professional, a Microsoft certified Azure solutions architect expert, co-founder and chief innovations architect of Face Technologies UK Limited. He can be reached at … and on Linkedin: https://www.linkedin.com/in/olusegun-afolabi-307931184/
