This report does not constitute a rating action.
The launch of the first regulated stablecoin in Nigeria, the cNGN, could increase competition in domestic payments and spur financial inclusion in the country. Yet it is unlikely to disrupt the banking sector. We do not expect the cNGN to replace foreign currency-pegged stablecoins that are already used in the country, primarily to protect savings against the volatility of the Nigerian naira and for international transactions.
What's Happening
In February 2025, Wrapped CBDC and the Africa Stablecoin Consortium launched the cNGN, the first regulated stablecoin in Nigeria. The cNGN is pegged to the naira and reportedly 100% backed by naira reserves held at licensed custodian banks. As of Feb. 10, 2025, 66.1 million cNGN tokens circulated among 18 holders. The cNGN can be purchased by licensed users on the cNGN platform and on Busha, a licensed digital asset exchange in Nigeria.
Why It Matters
Higher retail adoption of the cNGN could intensify competition in domestic payments and improve financial inclusion. We think the adoption of the cNGN in Nigeria will increase gradually, particularly for domestic transactions, because of the country's large informal sector, Nigerians' preference for efficient payment solutions, and cash shortages. The cNGN could provide an alternative payment solution for small businesses and individuals who largely operate in the informal sector. Based on estimations by World Economics, the informal sector accounted for about 58% of Nigeria's GDP in 2023. Cash shortages, which have been prevalent in the country since the naira redesign project in 2023, created an opportunity for financial technology companies to provide alternative payment solutions for unbanked or underbanked individuals. Nigeria has one of the highest crypto currency adoption rates globally, which is mainly driven by the younger population. It remains to be seen if the adoption of the cNGN will exceed that of the eNaira, which the Central bank of Nigeria (CBN) launched in 2021. As of March 31, 2024, the eNaira accounted for less than 1% of total currency in circulation. The limited adoption is partly due to relatively low bank penetration rates and the cap on the amount of central bank digital currency that retail users are allowed to hold. The cNGN's promotion by the private sector could support its adoption.
We expect the volatility of the naira and high inflation will hamper the use of the cNGN as a savings product. The exchange rate of the naira against hard currencies has been volatile amid constrained foreign currency supply, considering the significant depreciation of the naira since the exchange rate liberalization in June 2023. This, together with high inflation in the country, contributed to the adoption of foreign currency-denominated stablecoins as a cross-border payment solution, particularly for remittances, and increased the appeal of stablecoins and other crypto assets as a savings product.
We expect the effect of the cNGN on Nigeria's banking sector will be limited. Although the cNGN could increase competition in the domestic payments space, we think banks benefit from their long track record, which fosters client trust, and their access to capital markets, which supports their investments in digital payment solutions. Additionally, banks' investments in digitalization over the past decade spurred digital transactions and contributed to non-interest revenues.
What Comes Next
The regulation of digital assets is a work in progress. The licensing of the cNGN by the Nigeria Securities and Exchange Commission (SEC) and the CBN is another step toward the adoption and regulation of digital assets in Nigeria. We expect further innovations and more regulatory clarity in the digital assets space over the next few years. The SEC already provides an incubation program that enables companies to test new products and services in a regulatory controlled environment. Most of these companies are experimenting with distributed ledger technology to create and trade crypto assets. If their tests are successful, the adoption of crypto assets in Nigeria will likely increase.
Related Research
- Nigeria, Feb. 3, 2025
- Nigerian Banking Outlook 2025: Resilient Performance Amid Macroeconomic Pressures, Jan. 23, 2025
- Banking Industry Country Risk Assessment: Nigeria, Dec. 13, 2024
- Central Bank Of Nigeria's Digital Currency Launch Is An Evolution, Not A Revolution, Oct. 28, 2021
| Primary Contact: | Charlotte Masvongo, Johannesburg 27-112144816; charlotte.masvongo@spglobal.com |
| Secondary Contact: | Mohamed Damak, Dubai 97143727153; mohamed.damak@spglobal.com |
No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.