IMF: Nigeria’s stablecoin boom raises monetary risks

The IMF found Nigeria received about $59 billion in crypto-asset inflows between July 2023 and June 2024 and accounted for roughly 60% of stablecoin inflows to sub-Saharan Africa since 2019.

The report described dollar-pegged stablecoins as ‘a meaningful cross-border payments channel’ for Nigeria. The fund noted stablecoins can cut costs, speed up remittances and expand access to financial services for people without bank accounts.

The IMF flagged risks including a potential ‘digital form of dollarization’ that could reduce the Central Bank of Nigeria’s ability to use monetary policy. Standard financial monitoring often fails to capture stablecoin transactions, and anonymity in some transfers raises the risk of illicit finance. The report added that efforts to suppress stablecoin use are likely to be only partly effective and recommended a pragmatic response that permits innovation while managing risks.

To protect monetary stability, the IMF recommended continued macroeconomic reforms and tighter monetary policy. The report urged stronger oversight of crypto flows, improved data by combining blockchain analytics with mandatory reporting on conversions between the naira and stablecoins, and upgrades to payment infrastructure to reduce reliance on unregulated channels.

The fund stated better data and supervision would help trace suspicious transactions and enforce anti-money-laundering rules. It recommended linking on-chain analytics with information from on-ramps and off-ramps to clarify how stablecoins move into and out of the Nigerian financial system.

The IMF has repeatedly raised stablecoins as a risk to central bank control and financial stability. In a separate advisory last week, the fund called for close monitoring of crypto adoption in Nepal because of risks that digital assets could be used to bypass capital controls or trigger large deposit outflows.

The report did not call for an outright ban in Nigeria. Instead, it set out measures intended to preserve monetary policy effectiveness and improve financial integrity while permitting continued use of stablecoins under tighter safeguards.