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Western Union’s plan to integrate stablecoins into its global payment network could reshape Nigeria’s financial landscape, threatening the dominance of local banks in the remittance market while raising new questions about the stability of the naira.

Nigeria is one of the largest remittance destinations in the world, with $20.98 billion flown into the country in 2024, according to the World Bank. These inflows are not just lifelines for households but also critical sources of foreign exchange for the banking system and Nigeria as a whole. Commercial banks rely on foreign investment, remittances and other trading activities for liquidity, while the Central Bank of Nigeria (CBN) counts on oil revenue and diaspora dollars to ease pressure on the exchange rate.

Western Union’s entry into the stablecoin space is therefore more than just a corporate experiment. By enabling customers to send and receive USD-backed digital tokens quickly and cheaply, the company could bypass many of the traditional banking channels that currently process remittances.

Pressure on Nigerian banks

For banks, this development poses a two-sided threat. First, there is the direct loss of fee income. Remittance transfers are often routed through Nigerian banks, which charge for settlement, account deposits, and withdrawals. For instance, Stanbic IBTC’s 2024 pricing guide shows that withdrawals from domiciliary accounts attract a commission of 0.05 percent of transaction value or $10, whichever is lower. GTBank, by contrast, according to a customer, imposes a $10 monthly maintenance fee on domiciliary accounts, in addition to about $1 charged on a $1,000 cash withdrawal.

For GTBank customers, the cost of maintaining a domiciliary account quickly adds up, while Stanbic’s model is more “pay-per-use” and cheaper for light users. Stablecoins, however, offer a middle ground, low cost like Stanbic, but without the burden of traditional banking infrastructure.

Western Union’s leadership sees this not as a threat but as a natural evolution. As CEO Devin McGranahan put it, stablecoins are “just one more opportunity to innovate… to move money faster across borders, convert to fiat currencies, and act as a store of value where local money is unstable.” This outlook underscores how directly Nigeria’s remittance market, one of the largest in Africa, could be reshaped.

Dollarisation risk

The implications for the naira could be profound. Stablecoins, by design, are pegged to the U.S. dollar or other major currencies. Widespread adoption of dollar-backed stablecoins in Nigeria would effectively deepen dollarisation, encouraging people to save and transact in digital dollars rather than naira. This undermines confidence in the local currency and could add pressure to already fragile exchange rates.

The possible upside

Yet, the picture isn’t entirely negative. The World Bank estimates the average cost of sending money to sub-Saharan Africa is 3 percent. For Nigeria, 2023 data puts the cost closer to 4.6 percent of the amount sent.

Stablecoin transfers could reduce these costs dramatically, leaving more money in the hands of recipients. While this may not immediately translate into higher official FX inflows, since many households may hold or circulate digital dollars outside the banking system, the efficiency gains could encourage greater use of remittance services. Over time, that broader participation could still expand the overall pool of foreign exchange linked to Nigeria, even if the central bank captures less of it directly.

Policy dilemma

Nigeria’s policymakers therefore face a dilemma. They can resist, by tightening restrictions on stablecoin use, hoping to preserve banks’ role in the remittance chain and protect the naira from further erosion. Or they can adapt, by creating a regulatory framework that allows banks and fintechs to integrate stablecoin rails into their systems.

The Central Bank of Nigeria (CBN) has already taken steps to ring-fence remittance flows. In June 2024, it issued a circular directing that all diaspora remittances must “terminate in naira,” with International Money Transfer Operators (IMTOs) settling through the official NAFEM window at prevailing market rates. The policy was intended to boost naira liquidity and ensure that inflows pass through formal channels.

Stablecoins, however, present a clear challenge to this approach. By allowing Nigerians to receive and hold digital dollars directly, Western Union’s model could bypass the CBN’s framework entirely. That would weaken the Bank’s ability to control FX liquidity, even as remittances continue to grow.

Some experts suggest a middle path: encouraging stablecoin remittances but requiring conversion through licensed banks. Others argue Nigeria should consider launching its own naira-backed stablecoin, giving households a digital alternative without ceding ground to dollar-denominated assets.

Looking ahead

Western Union’s stablecoin plan is still in its pilot phase, but its potential impact on Nigeria is clear. If successful, it could force Nigerian banks to rethink their role in cross-border payments and accelerate the country’s debate over digital currency policy.

For the naira, the stakes are high. Stablecoins may bring cheaper remittances and faster transfers, but they also risk cementing the dollar’s dominance in everyday Nigerian financial life. Whether this shift undermines or strengthens the economy will depend largely on how quickly banks and regulators respond.