IMF Warns Nigeria's Stablecoin Addiction Risks Monetary Policy Erosion

The International Monetary Fund (IMF) has issued a warning about Nigeria's growing reliance on stablecoins, which could weaken the country's control over its money. According to the IMF, most stablecoins used in Nigeria are pegged to the US dollar, making it easier for people to move value without using the local currency.

This 'digital form of dollarization' reduces demand for the naira and makes interest rate changes less effective, the IMF says. 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.

Nigeria has received almost 60% of sub-Saharan Africa's stablecoin inflows since 2019, with recent estimates suggesting crypto inflows between July 2023 and June 2024 reached over $59 billion, a large share of which came from stablecoins.