The IMF is warning that Nigeria’s fast-growing use of stablecoins could weaken the country’s control over its money. In a new note on digital tokens, the Fund says stablecoins are helping Nigerians move value cheaply but also creating “new policy trade-offs” for the central bank.
IMF Flags Risks From Digital Dollarization
According to the IMF, most stablecoins used in Nigeria track the U.S. dollar, so heavy use can appear to be “a digital form of dollarization.” As people shift savings and payments into dollar tokens instead of naira, they reduce demand for the local currency and make interest rate changes less effective. The Fund warns that “widespread reliance on foreign currency–backed stablecoins could weaken the effectiveness of domestic monetary policy” and raise the risk of capital flight.
The IMF also highlights financial integrity concerns. Because many stablecoin transfers take place in digital wallets and on offshore exchanges, they can slip outside traditional banking supervision. The speed and partial anonymity of some platforms, the Fund says, “can increase risks of illicit finance, including money laundering.”
Nigeria’s Dominant Role in Africa’s Stablecoin Flows
Nigeria is emerging as the stablecoin hub of sub-Saharan Africa. The IMF says the country has received almost 60% of the region’s stablecoin inflows since 2019. Recent news also estimated crypto inflows between July 2023 and June 2024 at over $59 billion, with a large share from stablecoins.
Earlier research from Chainalysis and Africa-focused studies found that stablecoins account for more than 43% of total crypto transaction volume in sub-Saharan Africa, well ahead of Bitcoin. Nigeria leads this shift, using dollar-pegged tokens for cross-border payments, savings, and hedging against a weaker naira.
The Fund is not calling for a ban but for stricter rules. It urges Nigeria to “bring stablecoin and other crypto-asset activities within the regulatory perimeter” through tougher licensing, reporting, and market surveillance. It also stresses the need for better data on naira–stablecoin flows so policymakers can see how fast money is leaving the banking system.
The IMF says the best defense against digital dollarization is a “stable and credible domestic currency” and cites Nigeria’s recent rate hikes and FX reforms as positive steps. However, it warns that without strong oversight, the rapid growth of stablecoin could “undermine monetary policy and complicate efforts to safeguard financial stability,” even as adoption continues to rise.
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