The International Monetary Fund (IMF) has warned that Nigeria’s fast-growing cryptocurrency market, particularly the rising use of stablecoins, could weaken the Central Bank of Nigeria’s (CBN) control over the naira and complicate monetary policy management.
In a new assessment released on Tuesday, the Fund said Nigerians are increasingly using dollar-pegged digital tokens to move money across borders, store value and make payments outside the formal banking system.
It said the trend is driving what it described as “digital dollarisation”, which could reduce demand for the naira and weaken the transmission of monetary policy decisions.
The warning comes amid ongoing economic pressures in Nigeria, including inflation and currency instability. Data from the National Bureau of Statistics (NBS) showed that headline inflation rose to 15.93 per cent year-on-year in May, up from 15.69 per cent in April.
In a blog post, the IMF said stablecoins and other crypto assets have become attractive to households and small businesses because they are often faster and cheaper than traditional payment systems. However, it noted that the shift also means more financial activity is taking place outside regulatory oversight.
The Fund said large-scale crypto usage in Nigeria is making it harder for authorities to track capital flows, monitor liquidity and manage exchange-rate pressures.
“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,” the IMF said.
Nigeria has emerged as one of Africa’s largest crypto markets. The IMF estimated that the country recorded about $59bn in crypto inflows between July 2023 and June 2024, with stablecoins accounting for a significant share of cross-border transactions.
It said the development is no longer marginal but has become a major payment channel with macroeconomic implications.
Beyond monetary policy concerns, the IMF also warned that weak regulation of crypto assets could increase risks of money laundering, terrorism financing, fraud and unrecorded capital outflows.
It said unregulated platforms could be used to bypass capital controls and weaken financial safeguards.
To address these risks, the Fund urged Nigerian authorities to strengthen oversight of stablecoins and digital asset exchanges, improve monitoring systems and enforce compliance among operators. It also called for clearer rules on licensing, taxation and anti-money laundering measures.
The IMF said digital assets are increasingly filling gaps in Nigeria’s payment and remittance systems, especially in an environment where confidence in the local currency remains fragile.
It warned, however, that failure to keep regulation in step with adoption could further pressure the naira and reduce control over monetary policy.
Meanwhile, the IMF also said the naira remains significantly undervalued despite recent exchange rate reforms, estimating its fair value at about N1,142 to the US dollar.
In its latest Article IV consultation report on Nigeria, the Fund said its Real Effective Exchange Rate (REER) model showed the naira is about 25.6 per cent below the level justified by economic fundamentals.
It explained that the REER—which measures a currency against trading partners after adjusting for inflation—showed mixed movements in 2025. The IMF said the REER appreciated by 32 per cent during the year, even though the nominal effective exchange rate depreciated by 5.2 per cent.
“Despite the REER appreciation that has already taken place in 2025, the EBA-lite REER model indicates a REER gap of -25.6 percent,” it said.
According to the report, the official exchange rate strengthened from N1,535/$ at the end of 2024 to N1,435/$ by the end of 2025, representing a 6.5 per cent appreciation.
However, on an annual average basis, the naira weakened from N1,479/$ in 2024 to N1,520/$ in 2025, a depreciation of 2.8 per cent.
The IMF said its model suggests the naira should trade at around N1,142.04/$ at the end of 2025, or N1,130.88/$ on average for the year, compared to the current official rate of about N1,356.27/$, indicating a persistent gap.
The findings come nearly three years after the Federal Government’s foreign exchange reforms in June 2023, which allowed a more flexible exchange rate system and removed multiple exchange windows.
While the reforms initially led to sharp depreciation, they were aimed at improving transparency, attracting investment and boosting liquidity in the FX market.
The IMF said further policy adjustments are still needed to fully correct the currency misalignment.
It also advised the Central Bank of Nigeria to slow the pace of foreign reserve accumulation, warning that aggressive buildup could limit exchange rate flexibility.
“Given the assessed REER undervaluation, slowing the pace of reserve accumulation and continuing to allow two-way movement of the naira exchange rate combined with strengthening FX market functioning and advancing fiscal and structural reforms… would help close the gap,” it said.
The Fund added that continued reforms to improve FX market efficiency, strengthen fiscal discipline and boost non-oil exports would help narrow the exchange rate gap and strengthen Nigeria’s external position.
