Economy
How Stablecoins Are Helping African Businesses Navigate Traditional Financial System Challenges
Introduction
Running a business in Africa comes with several challenges. One challenge is volatile local currencies, while others are delayed settlements and limited access to foreign exchange. It’s no surprise that more businesses are turning to stablecoins to stay afloat.
But, what are stablecoins, and why are they suddenly so relevant in African markets today? Stablecoins are almost like regular cryptocurrencies, but with a clear difference; their value is pegged to other assets like the U.S. dollar. This means, unlike volatile assets like Bitcoin or Ethereum, stablecoins maintain a consistent value. Prices in the broader digital assets market may change, but stablecoins are designed to remain unchanged.
Why does this matter? Stablecoins matter because they address many financial challenges in Africa.
Most African countries use different currencies (bar a few), different banking systems, and distinct economic structures. Though this is common in many parts of the world, it presents challenges with far-reaching effects in emerging markets. Although Nigeria, Ghana, Kenya and South Africa have relatively advanced financial systems that support instant interbank transfers, many countries on the continent still operate with weak or poor financial infrastructures. Unlike the Eurozone or SEPA, Africa lacks a unified monetary system. The Pan-African financial settlement infrastructure (a payment infrastructure launched by Afreximbank) remains limited.
Challenges of Traditional Financial Systems in Africa
Stablecoins create a lifeline for businesses grappling with the many limitations posed by traditional financial systems. These are:
Inefficient Cross-Border Payments
Cross-border transactions rely heavily on traditional financial institutions and multiple intermediaries, which often leads to delays, costly fees, and limited transparency. These systems are poorly suited for the needs of modern businesses, especially those with foreign exchange exposure.
Currency Volatility and Foreign Exchange Shortages
Many African economies still struggle with unstable local currencies and limited access to foreign exchange. Since most African countries are net importers, businesses constantly need hard currency to buy finished goods and sometimes raw materials from abroad. However, with central banks often unable to meet demand, they are forced to source forex on their own, mostly at unfavourable rates. Ledig Technologies effectively solves this challenge.
Limited Banking Infrastructure
The financial inclusion problem in emerging markets is also a challenge for traditional financial rails. In many African countries, particularly rural regions or conflict-affected zones, formal banking services are either unavailable or difficult to access. Limited access to banking infrastructure excludes businesses and individuals from accessing FX for key business opportunities, leading to over-reliance on inefficient rails.
High Remittance Costs
With cross-border transfers routed through legacy systems, fees often run high, and settlements are delayed. These hurt businesses, especially those that rely on timely payments to sustain operations. These challenges make alternative solutions essential, and stablecoins offer fast, borderless, low-cost transactions to address them.
Stablecoins as a Solution
Stablecoins address the financial challenges outlined through fast, stable, and cost-effective transactions. At their core, they are digital assets designed to maintain a stable value. There are three primary types of stablecoins: fiat-backed (e.g., USDT, USDC), crypto-collateralised (e.g., DAI), and algorithmic; though the latter are less popular due to their inherent risk.
Regardless of the model, they offer features that make them useful in underserved markets like Africa. Their most important advantage is price stability, a critical need in economies where inflation and currency volatility are common.
Beyond stability, stablecoins operate 24/7, unlike traditional banks that operate within limited hours, impacting settlement times. The ability to transfer value across borders using public blockchains, rather than legacy financial rails, is another defining advantage. Traditional cross-border payments rely on legacy networks that can be slow and expensive. By contrast, stablecoin transactions settle directly on blockchain networks, allowing users to move money to even the most remote nations in minutes, without relying on intermediaries.
Transaction costs on blockchain networks are typically lower than bank wires or traditional remittance services. While fees vary depending on the blockchain used, most stablecoin transfers cost a fraction of what traditional systems charge. Even Ethereum, which faced previous criticism for high gas fees, has implemented updates that now keep most transaction costs below $1. These savings are significant for businesses operating on tight margins and can be the difference between making a profit and running at a loss.
Furthermore, stablecoins allow users to bypass currency conversion fees and inefficiencies. Businesses that earn in one currency but operate in another often face high conversion spreads, regulatory bottlenecks, and inconsistent exchange rates. Stablecoins remove that friction, enabling businesses to receive, store, and pay in a stable currency regardless of their local banking environment.
Businesses with foreign exchange exposure across the continent are increasingly adding stablecoins to their daily operations for survival. Import and export business owners are top beneficiaries. They leverage stablecoins to streamline cross-border payments, settle suppliers quickly, and protect their capital from the currency volatility common across African markets. Others are PSPs, Crypto exchanges, Crypto payment gateways, Trade facilitators, among others.
Ledig and its institutional Stablecoin liquidity offering.
Ledig Technologies offers Stablecoin-powered liquidity for businesses and individuals across many industries. The company supports high-ticket transactions and helps businesses with FX exposure manage currency complexity in emerging markets, including over 17 African markets.
The company’s products cover all areas of stablecoin liquidity, including conversions, fiat and stablecoin wallets, hedging tools for volatility, and liquidity guarantee services. The company provides an Instant fiat-stablecoin and stablecoin-fiat conversion service, ensuring businesses have no exposure to local currencies even as they do business in those markets, effectively cutting out volatility.
Its volatility hedging tools help businesses access FX at a fixed rate over an agreed period of time, protecting capital from depreciation.
While its infrastructure is purpose-built for institutional clients, it also powers retail-facing platforms, helping them manage stablecoin-based treasuries while handling local currency invoicing and settlements in emerging markets.
Risks, Challenges, and Regulatory Outlook
Despite their growing relevance in Africa’s financial system, stablecoins are not without risks and challenges. The very features that make them appealing, such as stability, speed, and low transaction costs, also raise significant regulatory and operational concerns.
These challenges must be addressed to ensure stablecoins can be safely and effectively integrated into Africa’s financial ecosystem.
One prominent challenge is the lack of clear national cryptocurrency regulations across many African nations. Most governments are yet to establish comprehensive legal frameworks for digital assets, resulting in a regulatory grey zone where usage persists but enforcement is inconsistent. For example, Nigeria has moved between imposing bans and developing regulations, creating uncertainty for businesses and individuals integrating stablecoins into financial workflows. Although Nigeria’s Securities and Exchange Commission (SEC) has introduced a framework, enforcement remains inconsistent. In this regard, Ledig Technologies prioritises compliance, aligning operations with government directives as they are released and facilitating liquidity and other services only for businesses that pass its rigorous compliance process.
Anti-money laundering (AML) and counter-terrorism financing (CFT) compliance are also critical concerns. Stablecoins’ ability to facilitate peer-to-peer transfers without intermediaries raises fears of their potential use in illicit activities. To mitigate this, institutional liquidity providers like Ledig Technologies maintain blacklists and collaborate with law enforcement to keep bad actors out.
They check new wallets against known blacklists, like those from the Office of Foreign Assets Control (OFAC), Federal Bureau of Investigation (FBI), Circle and Tether. Ledig is also registered on the Nigerian Financial Intelligence Unit (NFIU) portal to coordinate reporting and ensure user-level enforcement is robust, helping prevent illicit use of stablecoin.
Another significant challenge for businesses is efficiently sourcing stablecoins. Ledig Technologies addresses this by offering large-volume liquidity at competitive rates. In addition to providing institutional liquidity for major African currencies such as the Nigerian Naira (NGN), Kenyan Shilling (KES), Egyptian Pound (EGP), and Ethiopian Birr (ETB), Ledig also supports hard-to-source currencies in Africa, including Malawi’s Kwacha (MWK).
Conclusion
As the future draws near and African businesses adjust to global realities, stablecoins will continue to be a suitable alternative to the complexities posed by traditional financial rails in many emerging markets today. Ledig Technologies, leveraging stablecoins, is positioned to help businesses effectively mitigate these challenges.
By Adedapo Adesanya
Dangote Petroleum Refinery is preparing to raise about $5 billion through an initial public offering (IPO) expected to conclude in October, in what could become the largest stock market listing in Africa’s history.
The company has already submitted an initial application to the Securities and Exchange Commission (SEC), with approval expected in the coming weeks. Once authorised, the refinery is expected to release its prospectus in September ahead of the public offer.
The primary listing will be on the Nigerian Exchange (NGX) Limited, although investors across Africa are expected to participate through structured investment instruments rather than a dual listing.
The proceeds will be used to expand the capacity of the 700,000-barrels-per-day refinery in Lagos and possibly support plans to replicate the project in Kenya as Dangote seeks to deepen Africa’s energy independence.
The proposed IPO comes after the refinery benefited from increased demand for refined products during the recent Iran conflict, supplying jet fuel across Africa and into Western Europe as global shortages disrupted markets.
As per Reuters, stock exchanges in South Africa, Kenya, Egypt, Ghana and Rwanda have held discussions with advisers to the transaction as interest in the offering continues to build across the continent.
Kenya alone could account for as much as $500 million of the targeted capital raise, driven largely by demand from institutional investors, including pension funds, the publication reported.
While the company is targeting a $5 billion raise, the final amount will depend on the outcome of the SEC’s review. If achieved, the offering would represent more than four per cent of the Nigerian Exchange’s current market capitalisation.
The IPO follows a $2.5 billion private placement completed last month, in which a six per cent stake in the refinery was sold, implying a valuation of about $40 billion.
That valuation, however, would place the refinery well above several listed global refining companies. Turkey’s Tupras, which operates a similar combined refining capacity across four facilities, has a market value of roughly $12 billion, while US-listed HF Sinclair, with a comparable processing capacity, is valued at around $16 billion.
Although the NGX generally requires companies on its main board to maintain a minimum free float of 20 per cent, there have been exceptions. Dangote Cement, for instance, currently has a free float of just over 12 per cent.
The publication also reported that investors outside Nigeria are likely to gain exposure through instruments such as global depositary receipts or exchange-traded products linked to the Nigerian-listed shares, rather than through a cross-listing on other African exchanges.
The founder of the 700,000-barrels-per-day capacity plant, Mr Aliko Dangote, said in April that the refinery aims to increase production capacity to 1.4 million barrels per day.
Mr Dangote is also pursuing plans to build another refinery in Lamu along Kenya’s coast in partnership with other East African governments, although it remains unclear whether part of the IPO proceeds will be allocated to that project valued at an estimated $17 billion.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange rallied by 0.89 per cent on Tuesday, August 4 amid renewed buying interest in unlisted stocks.
During the session, the market capitalisation added N24.07 billion to end at N2.739 trillion compared with Tuesday’s N2.715 trillion, while the NASD Security Index (NSI) gained 40.11 points to quote at 4,563.96 points compared with the preceding day’s 4,523.85 points.
The NASD OTC Exchange ended the trading session with two price losers and three gainers, led by Central Securities Clearing System (CSCS) Plc, which chalked up N7.80 to close at N119.80 per unit versus the previous session’s N112.00 per unit. Afriland Properties Plc increased its value by N1.27 to N23.95 per share from N22.68 per share, and Nitrox Industrial Gases Plc expanded by N1.15 to N21.15 per unit from N20.00 per unit.
On the flip side, FrieslandCampina Wamco Nigeria Plc slid by N8.64 to sell at N144.00 per share compared with the previous day’s N152.64 per share, and 11 Plc dipped by 1 Kobo to end at N225.00 per unit, in contrast to Monday’s closing price of N225.01 per unit.
Tuesday’s trading data showed that the volume of securities rose by 9.0 per cent to 1.6 million units from 1.5 million units, and the number of deals climbed by 6.5 per cent to 33 deals from 31 deals, while the value of securities dropped by 26.9 per cent to N47.6 million from N65.2 million.
At the close of trades, Great Nigeria Insurance (GNI) Plc remained the most traded stock by value on a year-to-date with 3.4 billion units worth N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units valued at N6.5 billion, and CSCS Plc with 76.9 million units exchanged for N5.5 billion.
GNI Plc also closed the session as the most traded stock by volume on a year-to-date with 3.4 billion units transacted for N8.4 billion, followed by Infracredit Plc with 2.3 billion units sold for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.
By Dipo Olowookere
A 0.38 per cent loss was suffered by Nigerian stocks on Tuesday on the back of continued selling pressure from investors embarking on profit-taking.
Data from the Nigerian Exchange (NGX) Limited showed that the contraction was influenced by the 1.78 per cent decline recorded by the insurance sector, the 0.24 per cent slip printed by the consumer goods index, and the 0.09 per cent drop posted by the energy space, offsetting the 0.75 per cent growth achieved by the banking sector and the 0.21 per cent growth recorded by the industrial goods segment.
Investor sentiment was weak during the trading day, as the bourse ended with 13 price gainers and 40 price losers, representing a negative market breadth index.
LivingTrust Mortgage depreciated by 10.00 per cent to N3.42, Multiverse also shed 10.00 per cent to N22.95, McNichols dropped 9.92 per cent to N5.45, Thomas Wyatt dipped by 9.87 per cent to N3.56, and Eterna lost 8.57 per cent to trade at N33.00.
On the flip side, AVA Capital improved by 9.94 per cent to N9.95, Livestock Feeds expanded by 9.71 per cent to N8.65, Neimeth increased by 8.43 per cent to N9.00, AIICO gained 3.47 per cent to settle at N4.18, and Oando grew by 3.30 per cent to N36.00.
A total of 1.6 billion equities valued at N28.7 billion exchanged hands in 54,160 deals yesterday versus the 923.0 million equities worth N37.9 billion traded in 72,544 deals on Monday, indicating a 73.35 per cent surge in the trading volume, a 24.27 per cent decline in the trading value, and a 25.34 per cent slip in the number of deals.
The busiest stock was Japaul, which transacted 904.4 million units for N2.7 billion. Sterling Holdings sold 54.0 million units valued at N431.9 million, FCMB exchanged 49.5 million units worth N545.9 million, Chams traded 44.9 million units for N199.2 million, and Neimeth sold 42.4 million units worth N327.8 million.
Business Post reports that the All-Share Index (ASI) gave up 927.70 points to 244,802.83 points from 245,730.53 points, and the market capitalisation receded by N599 billion to N158.016 trillion from N158.615 trillion.
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