Nigerians are increasingly turning to personal loans to cope with the harsh realities of rising inflation, according to a recent report by the Central Bank of Nigeria (CBN). The report revealed a significant 14.3% increase in the total value of personal loans obtained in January 2024 compared to December 2023. This translates to a jump from ₦2.648 trillion to N3.03 trillion.
The CBN report further highlighted the dominance of personal loans within the consumer credit landscape. Personal loans accounted for a staggering 79.2% of total consumer credit, significantly outpacing retail loans which held a mere 20.8% share. This trend reflects the desperate need for Nigerians to bridge the widening gap between their income and rising living costs.
“Total consumer credit outstanding increased by 11.9 percent to N3.823trillion in January 2024, driven, mainly, by the rise in personal loans on the back of heightened inflation,” the CBN report stated.
Personal Loans Influences Digital Lenders Proliferation
The surge in personal loans comes amidst a backdrop of accelerating inflation that has severely eroded Nigerians’ purchasing power. A recent study by SBM Intelligence revealed a concerning statistic: 27% of Nigerians across various income brackets now rely on loan applications to maintain their basic living expenses due to record inflation. This highlights the dire financial straits many Nigerians face and their increasing dependence on debt to make ends meet.
The rising demand for personal loans coincides with a significant increase in the number of digital lenders operating in Nigeria. As reported by BusinessDay, the total number of approved digital lenders has skyrocketed by 64.16% since April 2023. This growth reflects the growing appetite for credit among Nigerians grappling with weakened purchasing power and escalating prices.
The Federal Competition and Consumer Protection Commission (FCCPC) reported a surge in the number of digital lenders, rising from 173 in April 2023 to 284 in May 2024. This rapid expansion raises concerns about responsible lending practices and the potential for predatory lending tactics that could further entrap vulnerable borrowers in a cycle of debt.
If You Ask Me
While digital lenders offer a convenient and accessible source of credit, the rapid growth of this sector necessitates strong regulatory frameworks to protect borrowers. The authorities must ensure lenders adhere to ethical lending practices, including transparent interest rates, clear loan terms, and responsible debt collection methods.
Furthermore, Nigerians seeking personal loans must exercise caution and thoroughly research different lenders before committing. Carefully assessing loan terms, interest rates, and repayment schedules is crucial to avoid falling victim to predatory lending practices.
The surge in personal loans in Nigeria underscores the urgent need for solutions to address the root cause of the problem: inflation. The government must implement policies to curb inflation and stimulate economic growth. This will not only ease the financial burden on Nigerians but also promote responsible borrowing practices and ensure a more sustainable financial future for the nation.
