By Seun Ibiyemi
The International Monetary Fund (IMF) has identified the rapid growth of stablecoin usage in Nigeria as an emerging channel for cross-border payments, highlighting both its benefits and potential risks to the country’s financial system.
In a report released on Tuesday, the IMF said digital assets pegged to the United States dollar are increasingly helping Nigerians overcome payment challenges, while simultaneously creating new regulatory and monetary policy concerns.
The report, titled “Stablecoins in Nigeria: A Growing Cross-Border Channel,” was authored by Axel Schimmelpfennig and Bo Zhao.
According to the report, Nigeria received approximately $59 billion in crypto-asset inflows between July 2023 and June 2024, underscoring the country’s growing prominence in the global digital asset ecosystem.
The IMF noted that Nigeria ranked second worldwide in the 2024 Global Crypto Adoption Index compiled by chainalysis.com and accounted for roughly 60 per cent of all stablecoin inflows into sub-Saharan Africa since 2019.
It explained that stablecoins have evolved from a niche technology into a significant mechanism for international transactions, particularly among households and small businesses increasingly using smartphones and digital wallets.
The organisation said stablecoins have gained popularity because they enable faster and cheaper cross-border transfers, allowing users to receive remittances or make international payments within minutes using only internet connectivity.
According to the report, this has been particularly beneficial for individuals with limited access to conventional banking services.
The IMF further observed that stablecoins provide liquidity and settlement options for cryptocurrency trading while helping users hedge against domestic economic pressures.
It cited naira depreciation, persistent inflation and foreign exchange shortages as key factors driving the growing demand for dollar-linked digital assets in Nigeria.
“Stablecoins became attractive as users sought protection against currency risks and alternative means of paying foreign suppliers,” the report noted.
The IMF recalled that following restrictions imposed by the Central Bank of Nigeria (CBN) on banks servicing cryptocurrency exchanges in 2021, a significant portion of crypto-related activity migrated to peer-to-peer platforms with less regulatory oversight.
While acknowledging the potential of stablecoins to improve remittances, trade and financial inclusion, the IMF warned that widespread adoption could pose challenges to monetary policy effectiveness and financial stability.
The report stated that extensive use of dollar-denominated stablecoins could contribute to a form of digital dollarisation, reducing demand for the naira and weakening monetary policy transmission mechanisms.
It also raised concerns about financial integrity, warning that some digital platforms may not maintain the same monitoring and compliance standards as traditional financial institutions.
According to the IMF, the speed and relative anonymity associated with some stablecoin transactions could increase risks related to money laundering and illicit financial flows.
Rather than suppressing stablecoin activities, however, the organisation advised Nigerian authorities to adopt a balanced approach that supports innovation while mitigating emerging risks.
The fund outlined four policy priorities, including safeguarding monetary stability, strengthening regulatory frameworks, improving data collection and enhancing payment infrastructure.
It stressed that maintaining confidence in the naira remains critical to limiting the risks of digital dollarisation and commended recent economic reforms and tighter monetary policies aimed at improving macroeconomic stability.
The IMF also called for clearer regulations for stablecoin issuers and stronger supervisory mechanisms aligned with international standards while reflecting local realities.
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Additionally, it recommended better monitoring systems combining blockchain analytics with data on naira-to-stablecoin conversions to help regulators track market developments more effectively.
The organisation noted that continued investment in faster, cheaper and more interconnected payment systems could reduce reliance on informal transaction channels.
According to the IMF, stablecoins should neither be viewed as a temporary phenomenon nor as a replacement for traditional financial systems.
Instead, the fund described them as an innovation addressing longstanding inefficiencies in cross-border payments, adding that the key challenge for policymakers is striking the right balance between technological innovation and effective regulation.
