Trends & insightsAnalysis
Why Nigeria leads Africa in stablecoins, and what the IMF wants done about it
About $59 billion of crypto-asset inflows reached Nigeria in the year to June 2024. The IMF says high remittance costs and a weak naira drove demand, and sets out four priorities for policymakers.
What happened
In a 16 June article, the IMF said Nigeria accounts for roughly 60% of sub-Saharan Africa's stablecoin inflows since 2019 and received about $59 billion in crypto-asset inflows between July 2023 and June 2024.
Why it matters
Dollar-linked stablecoins are filling gaps left by costly remittances and scarce foreign exchange, but the IMF says widespread use can resemble a digital form of dollarisation and weaken monetary policy.
What to watch
Whether Nigeria clarifies how stablecoin issuers are treated, and whether faster, cheaper cross-border payments reduce reliance on unregulated channels.
Nigeria is where stablecoins have found their largest African market. In an article published on 16 June, IMF staff Axel Schimmelpfennig and Bo Zhao wrote that Nigeria received about $59 billion in crypto-asset inflows between July 2023 and June 2024, and that it accounts for roughly 60% of sub-Saharan Africa's stablecoin inflows since 2019.
Why people use them
The IMF's explanation is practical. With a smartphone and an internet connection, a person can send or receive a cross-border payment in minutes, often more cheaply than through traditional channels. Sending $200 to sub-Saharan Africa costs around 9% of the amount on average, the IMF noted, citing the World Bank, against a global average of 6%.
Domestic pressure added to demand. Sharp depreciation of the naira, high inflation and limited access to foreign exchange in 2023 and 2024 increased demand for dollar-linked assets. Stablecoins served as a hedge against currency risk and as a way to pay overseas suppliers.
What worries the IMF
The IMF names three risks. First, widespread use of dollar-denominated stablecoins "can resemble a digital form of dollarization", and by reducing demand for the local currency it "could weaken the transmission of domestic monetary policy". Second, activity that moves from banks to wallets and exchanges may escape monitoring designed for traditional intermediaries. Third, fast or anonymous platforms can raise money-laundering risk.
What it recommends
The IMF sets out four priorities:
- Keep the currency stable and credible, and sustain the recent reforms that have helped restore confidence in the naira.
- Clarify how stablecoin issuers are treated, and align domestic rules with international frameworks.
- Combine blockchain analytics with reporting on conversions between naira and stablecoins, so regulators can spot risks early.
- Invest in faster, cheaper and more interoperable cross-border payment systems, to reduce reliance on unregulated channels.
A restriction that did not stop use
The central bank has tried restriction before. In February 2021 it told banks to stop servicing crypto exchanges. Activity moved towards less regulated channels, notably peer-to-peer platforms, the IMF notes.
What it means for businesses
For a finance team, the IMF's reasoning points to a simple pattern: demand for stablecoins tracks the cost and availability of the formal alternative. When the naira weakened and dollars were hard to get through banks, people reached for dollar tokens. Whether that demand fades depends on whether banks and payment networks can offer comparable speed and price.
What to watch
- OngoingTreatment of stablecoin issuers. The IMF asks Nigeria to clarify the rules. Watch for guidance from regulators.
- OngoingCross-border payment costs.. The IMF links stablecoin demand to remittance costs of around 9% for $200.