Stablecoins in Nigeria: A Growing Cross-Border Channel
By Axel Schimmelpfennig and Bo Zhao
Nigerian households and small firms are moving money across borders in a new
way: via smartphones, digital wallets, and U.S. dollar–pegged crypto assets known
as stablecoins. What began as a niche technology has become a meaningful cross-
border payments channel. Its rapid growth is easing long-standing frictions in
cross-border transactions. It is also testing the limits of existing monetary and
regulatory frameworks.
The scale is striking, even though measurement remains imperfect. Nigeria
received about $59 billion in crypto-asset inflows between July 2023 and June
2024. It ranked second globally on Chainalysis’s 2024 Global Crypto Adoption
Index, and sixth in 2025. Within sub-Saharan Africa, Nigeria accounts for roughly
60 percent of stablecoin inflows since 2019. Stablecoins now form a key bridge
between crypto markets and the traditional financial system, as detailed in
analysis as part of the IMF’s latest annual economic health check for Nigeria
(Article IV report, Annex VII).
Why stablecoins have taken hold
The appeal is straightforward. Stablecoins allow users with a smartphone and
internet access to receive remittances or make cross-border payments in minutes,
often at lower cost than traditional channels. For households and small firms with
limited access to formal banking services, this is a practical alternative.
Global drivers help explain the broader uptake. Stablecoins are relatively stable in
value, easy to transfer, and widely used as settlement assets within crypto
markets. They facilitate trading between exchanges and provide a convenient
store of liquidity. For remittances, they can undercut conventional channels,
where the average cost of sending US$200 to sub-Saharan Africa remains around
9 percent of transaction value, well above the global average of 6 percent,
according to the World Bank.
Domestic conditions have amplified these effects. In 2023 and 2024, the sharp
depreciation of the naira, high inflation, and constrained access to foreign
exchange increased demand for dollar-linked assets. Stablecoins offered both a
hedge against currency risk and a tool for paying overseas suppliers. After the
Central Bank of Nigeria (CBN) restricted banks from servicing crypto exchanges in
February 2021, activity shifted to less regulated channels, notably peer-to-peer
platforms.
Policy trade-offs
The rise of stablecoins brings clear benefits. Faster, cheaper cross-border
payments can support trade, remittances, and financial inclusion. Yet the same
features raise policy concerns.
One is monetary sovereignty. As stablecoins are typically denominated in U.S.
dollars, widespread use can resemble a digital form of dollarization. By reducing
demand for the local currency, it could weaken the transmission of domestic
monetary policy.
Another concern is financial integrity. Activity that once flowed through banks is
moving increasingly to digital wallets and crypto exchanges. Monitoring systems
designed for traditional intermediaries may not capture these transactions
effectively. The speed and anonymity of some platforms can also increase risks of
illicit finance, including money laundering.
These risks are not unique to Nigeria, but the scale of adoption makes them more
pronounced.
A pragmatic policy response
Attempts to suppress stablecoin use are likely to be only partly effective. A more
durable approach is to allow innovation while managing risks. Here IMF analysis
identifies four priorities.
First, safeguard monetary stability. The most effective defense against digital
dollarization is a stable and credible domestic currency. Nigeria’s recent
macroeconomic reforms and tighter monetary policy have helped restore
confidence in the naira. Sustaining this progress will be critical.
Second, strengthen oversight. Nigeria has taken steps in this direction, including
Nigeria’s Securities and Exchange Commission rules for virtual asset service
providers and CBN guidance on their interaction with banks. The next step is to
clarify the treatment of stablecoin issuers and align domestic rules with emerging
international frameworks, such as those in the European Union, Singapore, Hong
Kong SAR, Japan, and the United States, while adapting them to local conditions.
Third, improve data. Policymakers need better visibility on how stablecoins are
used, particularly at the interface with the domestic financial system. Combining
blockchain analytics with reporting on naira–stablecoin conversions would help
regulators identify risks early and respond more effectively.
Finally, upgrade the payment infrastructure. Much of the demand for stablecoins
reflects gaps in existing systems. Nigeria has made progress through instant
domestic payments and participation in regional initiatives such as the Pan-
African Payment and Settlement System. Further investment in faster, cheaper,
and more interoperable cross-border systems could reduce reliance on
unregulated channels.
An evolving landscape
Stablecoins are neither a passing trend nor a complete substitute for traditional
finance. They are best seen as a response to persistent frictions in cross-border
payments. In Nigeria, those frictions are real, and users have found a workaround.
The policy challenge is to narrow the gap that made the workaround attractive,
while ensuring that new risks remain contained. That requires a clear strategy:
open to innovation but anchored in sound macroeconomic policy and effective
regulation.
Axel Schimmelpfennig is the IMF Mission Chief for Nigeria. Bo Zhao is an economist in the IMF’s
Strategy, Policy, and Review Department.