Nigerians borrowed a staggering N470 billion in personal loans from banks within the last quarter of 2024, underscoring a growing dependence on credit as economic hardship deepens across the country.
The Central Bank of Nigeria (CBN) disclosed this in its Fourth Quarter 2024 Economic Report, revealing a significant rise in consumer credit, primarily driven by personal loans.
The report indicated that consumer credit outstanding surged by 11.06%, climbing from N4.25 trillion at the end of September 2024 to N4.72 trillion by December 2024. A closer look at the data showed that personal loans were the primary driver of this increase, jumping by 21.27% within the quarter to reach N3.82 trillion, compared to N3.15 trillion recorded at the end of the previous quarter.
The sharp rise in personal loans has watered down earlier concerns that Nigeria’s soaring interest rates would deter borrowing from banks. Instead, the development suggests that many Nigerians have no choice but to seek loans to survive, even at higher borrowing costs. Financial experts believe that this increase is a sign of squeezed spending power, with more individuals relying on loans to meet basic needs.
While personal loans saw substantial growth, retail loans, which include credit facilities for businesses and consumer purchases, declined sharply by 18.18%. Retail loans dropped from N1.10 trillion in September 2024 to N0.90 trillion in December, indicating that businesses and entrepreneurs are cutting back on borrowing, possibly due to high interest rates and economic uncertainty.
The CBN report stated, “Consumer credit outstanding rose by 11.06 per cent to N4.72 trillion at end-December 2024, from N4.25 trillion at end-September 2024. Personal loans increased by 21.27 per cent to N3.82 trillion compared with the level at the end of September 2024. Retail loan, however, declined by 18.18 per cent to N0.90 trillion from N1.10 trillion at end-September 2024. A breakdown indicated that personal loans, with a share of 80.98 per cent, remained dominant, while retail loans accounted for the balance.”
The report further highlighted that personal loans accounted for a dominant 80.98% of the total consumer credit portfolio, a clear indication that more individuals are turning to borrowing as a financial lifeline. The surge in personal loans reflects a troubling reality in Nigeria’s economy—declining household incomes and persistent inflation have left many citizens with little choice but to seek credit to sustain themselves.
Rising inflation and stagnant wages have eroded purchasing power, making it increasingly difficult for individuals to afford basic necessities. This has forced many to rely on personal loans to cover expenses such as rent, school fees, medical bills, and even daily sustenance.
The continued rise in personal loans comes at a time when borrowing has become increasingly expensive due to high interest rates. Throughout 2024, the CBN maintained a tight monetary policy stance in an attempt to curb inflation, which remains one of the biggest economic challenges in the country.
By the end of December 2024, Nigeria’s inflation rate had surged to 34.80%, up from 34.60% recorded in November. The rise in inflation was largely driven by increased demand during the festive season, particularly for food and non-alcoholic beverages. To combat inflationary pressures, the CBN’s Monetary Policy Committee implemented multiple rate hikes throughout the year, raising the Monetary Policy Rate (MPR) by a total of 875 basis points to 27.50% in 2024.
Higher interest rates typically discourage borrowing, as the cost of repaying loans increases. However, the latest CBN data shows that despite these rate hikes, demand for personal loans has continued to rise. This suggests that economic hardship has reached a point where people are willing to take on expensive loans just to survive.
As banks adjust their lending rates to reflect the higher MPR, the cost of borrowing has skyrocketed. Individuals who take personal loans today are facing significantly higher repayment obligations, further deepening their financial burdens. Yet, for many, the lack of alternatives leaves them with no option but to borrow at any cost.
Economic Implications of Rising Personal Loans
Economists note that the surge in personal loans amid Nigeria’s economic struggles raises serious concerns about financial stability. While access to credit can provide short-term relief, the reality is that borrowing at high interest rates could create long-term financial distress for individuals and households.
One major concern is the risk of rising non-performing loans (NPLs). As more Nigerians take on personal loans to survive, repayment difficulties are likely to increase, potentially leading to higher default rates. If individuals struggle to meet repayment obligations, banks may begin to experience a surge in bad loans, which could threaten the stability of the financial sector.
Another issue is the impact on overall consumer spending. With personal loans being used for basic needs rather than productive investments, the economy may struggle to grow at the expected pace. Typically, increased borrowing should fuel economic expansion, but when loans are primarily used for survival, economic growth remains weak.
At the same time, the sharp decline in retail loans suggests that businesses and entrepreneurs are holding back on borrowing, possibly due to the high cost of credit. If businesses are unable to access affordable loans, investment and expansion plans could be delayed, further slowing down economic recovery.
