Nigeria Borrows N3.9 Trillion as Economic Crisis Deepens.
Amid escalating living costs, Nigerians have increasingly turned to credit facilities, borrowing a total of N3.82 trillion from banks as of January 2024, according to the Central Bank of Nigeria (CBN). The latest monthly economic report reveals a significant rise in consumer credit, reflecting the impact of heightened inflation on personal finances.
The report highlights an 11.9% increase in total consumer credit from December 2023 to January 2024, driven primarily by a surge in personal loans. On a year-on-year basis, this marks an increase of N1.41 trillion from the N2.41 trillion recorded in January 2023. Personal loans saw a 14.3% rise to N3.028 trillion, while retail loans grew by 3.6% to N794.79 billion.
Personal loans now account for 79.2% of consumer credit, with retail loans making up the remaining 20.8%. This distribution underscores the struggles of Nigerians facing relentless inflation and declining purchasing power.
The report states, “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. A disaggregation of consumer credit revealed that personal loans 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.”
Increase in Sectoral Credit
The CBN also reported that total credit extended to key sectors of the economy rose by N13.22 billion, or 29.7%, to N57.76 billion in January, compared with N44.54 billion in the preceding month. This growth was driven by increases in credit to the services sector (25.6%), industry (37.5%), and agriculture (7.1%). The services sector remains dominant, accounting for 52.1% of the total credit, followed by industry at 44.7% and agriculture at 3.2%.
Inflation and Interest Rates
The inflation rate reached a 28-year high of 33.95% in May, prompting the CBN to hike the interest rate to 26.25%. This surge in inflation has led to deteriorating living standards and increased economic hardships, exacerbated by sweeping economic reforms implemented by the current administration. As a result, Nigeria is experiencing one of its worst economic crises in decades, characterized by soaring inflation, a depreciating national currency, and widespread financial struggles.
Rising Reliance on Loans
The economic strain has driven many Nigerians to seek loans to meet their basic needs. A study by SBM Intelligence found that 27% of Nigerians across different income categories now resort to loan apps to cope with living expenses. This surge in demand for loan apps highlights the severe impact of persistent inflation on daily life, especially for those with limited financial resources.
While citizens in the informal sector turn to loan apps, civil servants rely on their employers for financial support. Public servants have obtained credit facilities worth N6.1 billion from their respective state governments over a 15-month period, primarily for vehicle purchases, home construction, and furniture acquisition.
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Loan App Utilization
The founders of various loan companies have noted a sharp increase in loan requests due to the rising cost of goods and services, particularly since the removal of fuel subsidies. Adeshina Adewumi, CEO and founder of Trade Lenda, reported a 100% growth in user numbers and loan disbursements during the subsidy removal period.
Olajuwon Marc, founder of TellerOne, confirmed a similar trend, stating, “The number of approved loans has grown by up to 70%, and the demand has surged over 100%. People always need loans, and the harsh economic realities now are driving this.”
While loan apps provide some relief for small businesses and individuals, the underlying economic issues necessitate robust government intervention to achieve lasting solutions.
