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Home » Legal Parlance » Exploring The Potential Impact Of Naira Stablecoin On Nigerian’s Financial Landscape – Akitoye Adekunle

Exploring The Potential Impact Of Naira Stablecoin On Nigerian’s Financial Landscape – Akitoye Adekunle

Naira Stablecoin

Exploring The Potential Impact Of Naira Stablecoin On Nigerian’s Financial Landscape


As the digital currency landscape evolves globally, the introduction of a stablecoin tied to the Nigerian Naira raises questions about its implications for financial stability, inclusion, and economic growth. On the 4th of January 2024, the Africa Stablecoin Consortium disclosed that they are working in partnership with the Central Bank of Nigeria on a Naira Stable Coin, also known as the Compliant Naira Stable (CNGN), which is now set to be launched on February 27th 2024. This is contrary to the stance of the past administration on cryptocurrencies in 2021 where it banned Financial institutions from participating in the asset or providing banking services to businesses or individuals who trade in crypto, at some point blocking bank accounts of those found liable. The proposed Stablecoin which is pegged at 1:1 with the Naira is set to ameliorate some of the difficulties facing the Nigerian market

This paper explores the potential impact of the Naira stablecoin on Nigeria’s financial landscape. It considers the opportunities and challenges associated with the adoption of a Naira stablecoin, comparing it to other cryptocurrencies in other jurisdiction, examining its potential to enhance financial accessibility, reduce transaction costs, and promote economic resilience. Additionally, the paper investigates regulatory considerations and the overall transformative effect on Nigeria’s financial ecosystem.

Understanding the Concept of Stablecoin and Its Application

Stablecoins are cryptocurrencies whose value is pegged, or tied, to that of another currency, commodity, or financial instrument. Stablecoins aim to provide an alternative to the high volatility of the most popular cryptocurrencies, including Bitcoin (BTC), which has made crypto investments less suitable for common transactions[1]. Stablecoin serve various purposes in the cryptocurrency ecosystem. They provide a more reliable medium of exchange and a store of value, making them suitable for everyday transactions. Additionally, stablecoins can facilitate the movement of value across borders with reduced exposure to the extreme price volatility experienced by other cryptocurrencies. As a result, stablecoins have gained popularity for use in decentralized finance (DeFi) applications, remittances, and as a bridge between traditional finance and the crypto space.

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The primary objective of stablecoins is to minimize the price volatility that is the  characteristic of many traditional cryptocurrencies like Bitcoin, Ethereum etc. Also, unlike the traditional cryptocurrencies which are generally not backed by any physical assets, stablecoins are often collateralized or pegged to reserves which provides the level of stability that the traditional cryptocurrencies lack. Stablecoins are designed with a focus on practical utility, serving as a stable unit of account, a means of value transfer, and a bridge between traditional finance and the cryptocurrency ecosystem unlike traditional cryptocurrencies which  often serve as speculative assets, investments, or platforms for decentralized applications (DApps).

The three main types of stablecoins are Fiat-collateralized stablecoins, Crypto-collateralized stablecoins and the Algorithmic stablecoins.

  1. Fiat-collaterilzed Stablecoins: This type of stablecoin is usually pegged to a traditional currency like USD, these stablecoins are backed by a corresponding amount of fiat currency held in reserves. Examples include Tether (USDT),  USD Coin (USDC) and the proposed Naira Stablecoin (CNGN).
  2. Crypto-collateralized stablecoins: These are backed by other cryptocurrencies, using smart contracts and algorithms to maintain stability. DAI, pegged to the US dollar and collateralized by various cryptocurrencies on the Ethereum blockchain, is a notable example.
  3. Algorithmic stablecoins: These maintain stability through algorithmic mechanisms, without direct collateral backing. They adjust the coin supply based on market conditions to maintain the peg. An example of this is Ampleforth (AMPL).
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The Need for Naira Stablecoin and Its Impact on Financial Transactions

In February 2021, the Central Bank of Nigeria placed a ban on cryptocurrency transactions and ordered banks to desist from transacting with entities dealing in cryptocurrencies. The then CBN Governor, Godwin Emefiele, had announced that the restriction was necessary in view of the money laundering and terrorism financing risks posed by cryptocurrency. He also stressed only the vulnerability inherent in cryptocurrency operations, as well as the absence of regulation and consumer protection measures were also responsible for the policy.

On the 22nd of December 2023, the Central Bank of Nigeria changed its stance on crypto assets allowing the banks to disregard the earlier ban on crypto transactions. Sequel to the power to issue legal tender and promote a sound financial system in Nigeria[2], the Central Bank of Nigeria in conjunction with the African Stablecoin Consortium, created a Compliant Naira Stable (CNGN) which is now set to be launched on the 27th day of February 2024. Pegged at 1:1 with the Naira, the Naira Stablecoin is set to enormously ameliorate a number of difficulties associated with financing a cross-boarder transaction with the Naira and to provide stability, efficiency and a hedge against currency fluctuations.

The Nigerian financial landscape is being faced with difficulties associated with cross boarder transactions, sudden and drastic changes in currency value which has resulted several Nigerians to venture into speculative trades. Though Bitcoin remains the most popular cryptocurrency, it tends to suffer from high volatility in its price, or exchange rate. For instance, Bitcoin’s price rose from just under $5,000 in March 2020 to over $63,000 in April 2021 only to plunge almost 50% over the next two months.[3]Intraday swings also can be wild; the cryptocurrency often moves more than 10% in the span of a few hours. All this volatility can be great for traders, but it turns routine transactions like purchases into risky speculation for the buyer and seller causing them losses in their transactions. It is of essence to highlight the need and potential impact of the Naira Stablecoin on the Nigerian financial landscape.

1. Mitigating Currency Volatility

The Nigerian Naira has experienced significant volatility, which can pose challenges for businesses and individuals. A Naira stablecoin pegged 1:1 with Naira will offer a reliable digital representation of the national currency, reducing the impact of currency fluctuations.

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2. Enhancing Financial Inclusion:

Nigeria has a large unbanked population, and traditional banking services may be inaccessible to many. A Naira stablecoin, being a digital asset, has the potential to improve financial inclusion by providing a more accessible and inclusive means of conducting financial transactions.

3. Reducing Transaction Costs

Cross-border transactions and remittances often involve high fees. A Naira stablecoin could streamline and reduce the costs associated with these transactions, providing a more efficient and cost-effective method for international transfers.

4. Encouraging Innovation in the Financial Sector

The introduction of the Naira stablecoin could stimulate innovation in the financial sector. It may lead to the development of new fintech solutions, decentralized finance (DeFi) applications, and other financial services that leverage the stability and efficiency of a digital stablecoin.

5. Facilitating Decentralized Finance (DeFi)

DeFi platforms, which leverage blockchain technology to recreate and improve upon traditional financial systems, could benefit significantly from a Naira stablecoin. These platforms could use stablecoins for lending, borrowing, and various financial services without exposure to the volatility associated with non-stable cryptocurrencies.

6. Providing Monetary Policy Tools

A digital Naira stablecoin could offer policymakers additional tools for implementing monetary policy. Smart contract functionalities could enable automated and transparent monetary policy adjustments, contributing to economic stability.

The introduction of stablecoins provides a significant opportunity to address a pressing concern among Nigerian bettors: the volatility of the Naira. As a currency prone to frequent fluctuations, the unpredictable value of the Naira poses substantial risks for those involved in online betting and gambling activities. Stablecoins, notably USDC, are designed to maintain a stable value since they are pegged to the US Dollar. By embracing stablecoins for transactions in the realm of online betting, Nigerian bettors can safeguard themselves from the adverse effects of sudden and significant currency value fluctuations. For Nigerians abroad sending money home to loved ones, these cost savings could provide welcome relief. With remittances accounting for 6% of Nigerian GDP pre-COVID, improving this financial pipeline holds economic promise.

Risk and Challenges Associated With the Introduction of Naira Stablecoin (Cngn)

The launching of the Naira Stablecoin (CNGN), if perfectly implemented, will provide Nigeria with  a sustainable financial landscape which will eloquently boost the economic growth of the country. It should be noted that the implementation of the Naira Stablecoin in Nigeria will be accompanied with various risks and challenges which must be carefully managed in order to make the implementation a success. Some of these challenges includes;

1. The Issue of Popularity

This serves as one of the most important issues that could affect the smooth implementation of the Naira Stablecoin (CNGN). It is important to state that digital currencies have not always been a success in Nigeria. A good example of this is the eNaira. The eNaira was introduced in 2021 by the Central Bank of Nigeria as a central bank digital currency (CBDC) aimed at accelerating cross-border transactions and lowering remittance costs—not dissimilar to the nNGN’s touted benefits. However, one year post-launch, adoption remains lackluster , with less than 0.5% of Nigerians utilizing the digital currency. Therefore the issue of unpopularity can be a big challenge to the implementation of the Naira Stablecoin (CNGN).

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2. Naira Stablecoin as a Means of Money Laundering

While Naira Stablecoin aim to provide a secure and stable digital representation of the national currency, it is essential to recognize that the Naira Stablecoin can be misused for illicit activities, including money laundering. The issue of money laundering is quite rampant in Nigeria, therefore there is the need for a strong regulatory framework to protect against illicit activities that may be carried out under the guise of the implementation of the Naira Stablecoin.

3. Macroeconomic Impact

Introducing a stablecoin could have implications for monetary policy and macroeconomic stability. The stability of the Naira stablecoin may depend on the stability of the Naira itself or underlying assets. Therefore, the macroeconomic risks associated with the Naira, such as inflation or economic downturns, could impact the stability of the Naira stablecoin.

4. Cybersecurity Threats

Cryptocurrencies are susceptible to cybersecurity threats,  including theft, hacking and fraud. The secure management of private keys, the stability of smart contracts, and protection against cyber attacks are critical considerations.

5. Centralisation risk

Accounts can be embezzled, blocked, or accessed by unauthorised third parties. Centralisation risks mean the same monetary issues fiat-currencies face when a central authority has the power to print money without oversight. This can potentially lead to hyperinflation.

It should be noted that for the successful implementation of the Naira Stablecoin (CNGN) there is the need to resolve solve the following problems. Addressing these risks and challenges requires a collaborative effort from regulators, financial institutions, technology providers, and the wider community.


In conclusion, exploring the potential impact of a Naira stablecoin on Nigeria’s financial landscape reveals a multifaceted landscape of opportunities and challenges. The envisioned stability in value holds the promise of mitigating currency volatility, fostering financial inclusion, and catalyzing innovation within the country’s financial sector. The potential for reduced transaction costs and efficient cross-border transactions adds to the allure of a digital Naira.

However, this pursuit of innovation is not without its complexities. Regulatory frameworks must evolve to navigate the unique challenges posed by digital stablecoins. Technological infrastructure demands careful consideration, and the macroeconomic implications, including impacts on monetary policy and traditional banking, require thoughtful management.

In essence, the successful implementation of a Naira stablecoin necessitates a collaborative effort involving regulators, financial institutions, technological innovators, and the broader community. As Nigeria navigates the dynamic intersection of digital finance and traditional systems, a balanced approach is imperative to harness the transformative potential of a Naira stablecoin while addressing the associated risks. The journey ahead requires strategic planning, adaptability, and a commitment to fostering financial resilience and inclusion in the digital age.


  2. The Central Bank of Nigeria Act 2007


[2] Section 2(b) & (d) of the CBN ACT 2007


Image credit: Businessday NG

About Author

Adekunle is a 500-level student of Law in Lagos State University. I love writing articles and poetry. I also have an undying loce and passion for the Law.
Asides reading and writing I also love to participate in sport events which earned me the position of the sports director of Faculty of Law 2022/2023 session.

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