IMF: Nigeria’s crypto growth creating digital dollarisation, threatening monetary stability

Nigeria’s crypto growth creating digital dollarisation, threatening monetary stability :IMF

The International Monetary Fund (IMF) on Tuesday, warned that Nigeria’s fast-growing crypto market, especially the use of stablecoins, could weaken the Central Bank of Nigeria (CBN)’s grip on the naira and complicate monetary policy management.

In a new assessment, the Fund said Nigerians are increasingly using dollar-pegged digital tokens to move money across borders, save value and settle payments outside the formal banking system.

That shift, it said, is creating a form of digital dollarisation that could reduce demand for the naira and limit the effectiveness of monetary policy transmission.

The warning comes at a time when Nigeria is already dealing with persistent inflation, currency volatility and pressure on foreign exchange reserves. On Monday, the National Bureau of Statistics (NBS) revealed that Nigeria’s headline inflation rose by 24bps to 15.93 per cent year-on-year(y/y) in May as against 15.69 per cent recorded in April.

Hence in a blog post published by the IMF, households and small businesses saw that stablecoins and other crypto assets have become attractive because they can be faster and cheaper than traditional payment channels. But for policymakers, the same convenience raises concern that more transactions are taking place beyond the reach of regulators.

The IMF said crypto activity on the scale now seen in Nigeria makes it harder to track capital flows, monitor liquidity and enforce exchange-rate controls. “When payments move through digital wallets and offshore platforms, central bankers can lose visibility over how much money is entering or leaving the country. That makes it more difficult to manage the currency and respond quickly to shocks”, it said.

Nigeria has emerged as one of Africa’s biggest crypto markets. The IMF said the country received about $59 billion in crypto inflows between July 2023 and June 2024, with stablecoins accounting for a large share of cross-border transfers.

While noting that this trend is no longer a niche development, the fund said this is a growing payments channel with macroeconomic implications.

The concern is not only about monetary policy. The IMF also warned that weak oversight of crypto assets could create openings for money laundering, terrorism financing, fraud and unrecorded capital outflows.

It said platforms that operate outside the regulatory perimeter can be used to bypass capital flow restrictions and weaken financial safeguards.

To address the risks, the IMF urged Nigerian authorities to strengthen oversight of stablecoins and digital asset exchanges, improve surveillance tools and tighten enforcement against unlicensed operators. It also called for clearer rules on licensing, taxation and anti-money laundering compliance.

Digital assets are clearly filling a gap in payments and remittances, especially in an economy where trust in the local currency remains fragile.

But unless regulation keeps pace with adoption, the country could see more pressure on the naira and less control over its monetary system.

Meanwhile, the International Monetary Fund (IMF) has said the naira remains significantly undervalued despite recent gains following Nigeria’s foreign exchange reforms, estimating the currency’s fair value at about N1,142 to the US dollar.