Nigerians struggling with the rising cost of living have taken out N3.82 trillion in credit facilities from banks as of January 2024, according to the Central Bank of Nigeria (CBN). The latest monthly economic report from the CBN reveals an 11.9% increase in total consumer credit driven primarily by a surge in personal loans due to heightened inflation.
This figure marks a significant year-on-year rise from N2.41 trillion in January 2023. Personal loans alone increased by 14.3% to N3.028 trillion from N2.648 trillion in December 2023, while retail loans rose by 3.6% to N794.79 billion. Personal loans account for 79.2% of consumer credit, reflecting the severe impact of inflation on Nigerians’ purchasing power.
“Total consumer credit outstanding increased by 11.9% to N3.82 trillion in January 2024, driven mainly by the rise in personal loans on the back of heightened inflation,” the report stated. It also noted a decrease in consumer credit as a share of total credit from Other Depository Corporations (ODCs) to 6.6%, down from 7.7% the previous month.
The report also highlighted a 29.7% increase in total credit extended to key economic sectors, rising to N57.76 billion from N44.54 billion the previous month. This growth was driven by increased credit to the services (25.6%), industry (37.5%), and agricultural (7.1%) sectors. The services sector remained dominant, accounting for 52.1% of sectoral credit, followed by industry at 44.7% and agriculture at 3.2%.
Nigeria’s headline inflation rate hit a 28-year high of 33.95% in May, prompting the CBN to raise the interest rate consecutively to 26.25%. The resulting economic crisis, characterized by soaring inflation and a plummeting national currency, has left millions struggling to afford basic necessities.
A study by SBM Intelligence found that 27% of Nigerians across various income levels now rely on loan apps to cover living expenses amid record inflation. While those in the informal sector turn to these apps, civil servants seek financial relief from their employers.
Public servants have borrowed N6.1 billion from state governments over 15 months, from January 2023 to March 2024, through loans and salary advances, according to budget implementation reports from the Open States website. The loans were primarily for purchasing motor vehicles, homes, and furniture. Delta State provided the highest amount at N2.75 billion, followed by Kano State with N1.1 billion and Kebbi State with N680 million.
Founders of loan companies report a significant increase in loan demand due to the removal of fuel subsidies and the rising cost of goods and services. Adeshina Adewumi, CEO of Trade Lenda, noted a 100% growth in loan requests since the subsidy removal, with loans ranging from N50,000 to N5 million. Olajuwon Marc, founder of TellerOne, reported a 70% increase in approved loans, emphasizing that businesses now rely heavily on loans to survive the economic downturn.
While loan apps provide temporary relief to small businesses, the ongoing economic crisis demands comprehensive government intervention to address underlying issues and restore economic stability.
