Stablecoins have become a real payment circuit in Nigeria. For the IMF, their growth provides a concrete solution to costly transfers, but it is now testing the country's monetary and regulatory limits.
In brief
- In brief Nigeria concentrates nearly 60% of stablecoin flows in sub-Saharan Africa. These assets reduce the cost of payments, but promote digital dollarization. The IMF calls for clearer regulation without stifling innovation.
- These assets reduce the cost of payments, but promote digital dollarization.
- The IMF calls for clearer regulation without stifling innovation.
Stablecoins are taking over in Nigeria
Nigeria has accounted for nearly 60% of stablecoin inflows recorded in sub-Saharan Africa since 2019. This progression confirms a trend already visible in African adoption, driven by international transfers and the weakness of several local currencies.
Between July 2023 and June 2024, the country would have received around $59 billion in crypto-asset flows. Dollar-backed stablecoins play an important role in these transactions. They are used to receive money, pay suppliers or preserve part of your savings.
The phenomenon is therefore no longer limited to traders. Households and small businesses are now using digital wallets to bypass the slowness of banking networks. A smartphone and an internet connection can be enough to receive funds in just a few minutes.
A response to transfers that are too costly
The success of stablecoins is firstly based on a very concrete problem. Sending $200 to sub-Saharan Africa still costs about 9% of the amount transferred on average, compared to almost 6% globally.
These costs weigh heavily on families who rely on remittances from abroad. Stablecoins often offer a faster and cheaper transaction. They also allow small businesses to pay foreign partners without waiting several days.
Their relative stability reinforces their appeal. Unlike bitcoin, their value generally follows that of the dollar. In a country marked by fluctuations in the naira, they can therefore serve as both a means of transfer and a store of value.
This use, however, reveals a structural weakness. Nigerians are not just adopting stablecoins out of a taste for technology. They use them because traditional financial circuits remain expensiveslow or difficult to access.
The IMF fears digital dollarization
The IMF recognizes these benefits, but warns that the growth of stablecoins may reduce demand for the naira. The more households hold and exchange dollar-backed tokens, the less central the local currency occupies a place in the economy.
This substitution complicates the work of the Central Bank of Nigeria. Some transactions may leave traditional bank accounts to circulate in digital wallets. The authorities then have less visibility on capital movements.
Monetary policy could also lose effectiveness. A rise in rates or restriction of naira liquidity has less influence on users who store their value in digital dollars. The risk is therefore not only technological. It directly affects monetary sovereignty.
Cross-border transfers add another difficulty. Stablecoins circulate between several networks and platforms. This mobility can facilitate legitimate payments, but also complicate the detection of money laundering, fraud and undeclared flows.
Regulate without breaking usage
The IMF is not asking Nigeria to ban stablecoins. Instead, he recommends clearly integrating them into the regulatory scope. Platforms, intermediaries and conversion services should be subject to appropriate supervision.
The authorities will also need to improve data collection. Without reliable statistics, it remains difficult to measure the volumes actually intended for family transfers, trade, savings or illicit activities.
Too brutal regulation, however, would risk pushing transactions towards less visible channels. Nigeria is already experiencing this tension. Past restrictions have not suppressed the use of crypto. They sometimes made it more informal.
The real challenge, then, is to correct the problems that make stablecoins indispensable. This requires cheaper payments, a more credible currency and wider banking access. While the eNaira is still struggling to convince, digital dollars are already occupying the ground. Nigeria can no longer treat them as a marginal phenomenon.
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