The International Monetary Fund (IMF) has called on Nigeria to bring stablecoins and other crypto-asset activities within its regulatory perimeter. This recommendation is part of broader measures aimed at strengthening financial stability and safeguarding recent macroeconomic gains, as detailed in the IMF’s latest Article IV Consultation report on Nigeria.
The Fund's stance comes as Nigeria's crypto ecosystem continues to expand rapidly, fueled by retail adoption, demand for cross-border payments, and inflation hedging, despite evolving regulatory frameworks. IMF Directors emphasized the importance of strengthening supervisory frameworks to cover stablecoins and broader crypto-asset activities, signaling growing concern over risks that could spill into the formal financial system.
The IMF also noted that Nigeria’s financial system remains broadly resilient, supported by recent bank recapitalization efforts. However, it warned that continued vigilance is required as financial innovation accelerates. Directors backed the country’s flexible exchange rate regime, acknowledging that foreign exchange interventions may still play a supporting role under specific conditions.
Regarding capital flows, the Fund called for a gradual reduction in reliance on portfolio inflows due to rollover risks. It also recommended the phased removal of remaining exchange restrictions, capital flow management measures, and multiple currency practices as conditions permit. The IMF urged accelerated implementation of Basel III standards, including countercyclical capital buffers and liquidity coverage ratios, to strengthen Nigeria’s banking system resilience.
The IMF also advised that the Central Bank of Nigeria (CBN) may need to sterilize foreign exchange (FX) inflows resulting from higher oil prices to rein in inflationary pressures. Sterilization is a monetary policy tool that allows the central bank to limit the impact of foreign exchange activities on the domestic money supply by offsetting excess liquidity.
Consumer inflation in Nigeria picked up in March to 15.4%, after slowing for eleven months, and further climbed in April to 15.7% year-on-year, driven by spikes in food and energy costs. The IMF noted that Nigeria’s monetary policy must remain focused on taming price pressures and anchoring inflation expectations.
The IMF report also highlighted that Nigerian banks increase lending rates much faster when the CBN tightens monetary policy than they reduce them when policy is eased, describing this as a “rockets-and-feathers” pattern. While recent reforms have improved the transmission of monetary policy to market rates, the process remains incomplete, necessitating further reforms to the CBN’s operational framework and liquidity management system.
The Nigerian naira has shown relatively stable movement, settling at N1,361/$ against the US dollar. The currency's stability is supported by CBN interventions and gross foreign reserves that provide approximately nine months of import cover. The market action indicates that the greenback faces challenges from CBN intervention, automatic supply, localized sales by commercial banks, and a psychological barrier at the N1,350/$ mark.
The IMF's assessment comes shortly after the CBN’s latest Monetary Policy Committee (MPC) meeting, where policymakers maintained a tight monetary stance to consolidate gains against inflation and stabilize the economy. The Fund also pointed to Nigeria’s relatively high Cash Reserve Ratio (CRR), currently set at 45% for deposit money banks, as an area requiring reform.
