Nigerians Turn to Stablecoins for Protection Against Inflation
Traditional savings groups in Nigeria are looking at dollar-pegged stablecoins as a tool to protect their savings from local inflation.

Okeke Leticia Chigozie, a 28-year-old Nigerian logistics worker, dreams of opening her own shoe store in Nigeria. Having no credit history, she does not qualify for a bank loan to fund her enterprise. Instead, she joined a traditional savings group in her community, sometimes called esusu. These savings circles allow those without access to traditional banking services to save money and acquire loans or credit.
The problem is that in inflationary countries like Nigeria and Zimbabwe, the value of savings could plummet. Stablecoins – cryptocurrencies pegged to a strong fiat currency like the U.S. dollar or a basket of assets to keep their prices stable – could be a solution to Leticia’s problem.
“Devaluation is a problem because if you check the last two years, 20,000 naira doesn’t really have a lot of value now,” Leticia said. “What if I can actually invest this money somewhere or probably save it somewhere and the value doesn’t go down? Then I can use it for something better. Why not?”
Dollar stablecoins have become a compelling option for individuals and businesses in markets facing local currency volatility and hyperinflation, according to Josh Hawkins, senior vice president of marketing at Circle. In Argentina, another inflationary economy, people are increasingly turning to DAI, a stablecoin backed by the U.S. dollar, after the government imposed restrictions on the amount of dollars citizens could purchase.
“We've seen growing demand for digital dollars, especially over the past 12 months,” Hawkins told CoinDesk via an email.
Untapped market
Traditional savings groups, large and small, play a vital role in providing savings and credit opportunities to millions of people, not just in Nigeria but across the African continent. In Africa, around 350 million adults do not have bank accounts, according to the World Bank. Globally, the unbanked are disproportionately female and poor, and savings circles are mostly formed and run by women. In 2018, in South Africa alone, 11 million people were part of traditional savings groups (called skovels) and saved around $3 billion.
“I’m a low-income earner. Most of the people who join these African traditional savings groups are low-income earners,” Leticia said.
A small esusu, like the one Leticia joined, is made up of around 12 or more friends, colleagues or neighbors. The members periodically contribute a fixed portion of their earnings to a communal fund. Leticia contributes around 20,000 Nigerian naira ($41) monthly. After collection, the total sum is given to one member of the group on a rotational basis, which means each member of the group has a chance to access the full fund, without interest. To join the group, Leticia didn’t need to have a credit history or a bank account. Someone from the group just had to vouch for her.
Often, the funds that are collected are redistributed as they are, without any value increase. In fact, a 2017 study conducted in Ghana, Malawi and Uganda showed that although community savings groups helped boost the number and longevity of businesses created in villages, they did not increase total household income or food security.
Digitizing savings funds
Aronu Ugochukwu, CEO of fintech firm Xend Finance, said he created a platform that serviced African traditional savings groups because his mother, a professor of medicine, belonged to one. Growing up, every few months his mother would say, “This is my month.”
“And every time she said it's her month, she got a huge sum of money. So that's what she used to buy a car, or maybe pay for a big project,” Ugochukwu said.
Ugochukwu is introducing community cooperatives and credit unions to stablecoins. Through Xend, community savings groups and larger credit unions in Nigeria will have the opportunity to maintain the value of their savings and even earn higher yields by converting their funds to stablecoins like USDC backed by the U.S. dollar, Ugochukwu added.
To create Xend Finance, he partnered with TechFusion, a digital platform that helps credit unions and savings groups to manage their funds. TechFusion is one of many fintech firms coming in to digitize the informal savings sector in Nigeria.
“We're not changing what they are used to doing. We're just improving it, giving them more access to the international money markets,” Ugochukwu told CoinDesk.
But most of these savings funds are informal, he said. For context, Nigeria’s informal “cash” economy accounts for around 64% of its GDP. According to Ugochukwu, many larger informal credit unions use middlemen to manage funds that earn very low yields of around 1%.
“There's a lot of fraud going on there between the source and then the end users. So we've been trying to solve that problem,” Ugochukwu said.
But it’s not just about improving financial inclusion by giving people the technology to access financial services but digging into the root cause of this problem, which is low income, Matthew Okwe, CEO of TechFusion told CoinDesk.
You can always connect people to a bank when you open an account for them but if they don’t have money to put in the bank, that account is useless, he added. In fact, despite Nigeria adding 8.1 million new bank accounts in 2019, there were 45.57 million dormant or inactive accounts, according to local reports.
“What they basically need is to improve on their income opportunities. Once we are able to help them grow their income sustainably then giving them technology to manage, that process makes a lot of sense,” Okwe said.
Enter stablecoins
Leticia hasn’t really heard of many opportunities to increase her savings.
“You know, when you don't have so much you wouldn't really be hearing about or getting a whole lot,” Leticia said.
But if there was an opportunity for her to avoid devaluation and invest her money in something better, she said she’d be open to trying it.
“Because as it is, when it’s your turn and you take your money, you may not really have anything worthy in mind to spend it on or actually invest in, so the money becomes useless and you might end up spending it either way. So if there is a way to invest it in something stable, I’d like it very well,” Leticia said.
Opening aspiring entrepreneurs like Leticia to stablecoin investments is not impossible. According to the World Bank, the major driver of financial inclusion in sub-Saharan Africa has been mobile money accounts, or cash tied to an account on a mobile phone. Vodafone’s M-Pesa, for example, is one of the largest mobile money services in Africa, with around 40 million users across the continent.
Xend Finance, which can be accessed via a mobile phone, will enable groups to directly store their funds in stablecoins like USDC without a middleman while earning interest on the funds.
“Unlike fiat dollars, dollar-backed stablecoins are available instantly to anyone with an internet-connected device, anywhere in the world, with near-zero transaction fees,” Hawkins said.
Xend Finance, backed by Binance, ran a successful pilot in January with 1,500 participants from 75 countries, according to Ugochukwu. The platform is set to officially launch at the end of March.
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