Nigeria’s total consumer credit debt rose by 26.29% in November 2024, climbing to N4.42 trillion from N3.5 trillion in October. This surge suggests that more Nigerians are relying on borrowing, likely driven by rising inflation and higher living costs.
What is Consumer Credit?
Loans taken out to purchase goods and services are referred to as consumer credit. Personal loans for household needs and retail loans for the purchase of particular goods or services are examples of this. The rise in consumer credit indicates that more Nigerians are turning to loans in order to deal with the economic difficulties facing their nation.
Breakdown of the Loan Increase
The Central Bank of Nigeria’s (CBN) Monthly Economic Report showed that:
- Personal loans grew by 37.76%, rising from N2.41 trillion in October to N3.32 trillion in November. This category includes loans for daily expenses such as rent, school fees, and medical bills. It accounted for 74.95% of total consumer credit.
- Retail loans increased by 1.83%, growing from N1.09 trillion to N1.11 trillion. These loans are used to purchase goods like electronics, appliances, and cars. They made up 25.05% of total consumer credit.
Why Are Nigerians Borrowing More?
The sharp rise in borrowing is mainly due to the high cost of living. Inflation has made basic necessities more expensive, forcing many people to take loans to cover essential expenses. The CBN’s efforts to control inflation through high interest rates have made loans more expensive, but Nigerians continue to borrow despite these high costs.
CBN’s Interest Rate Policy
To combat inflation, the CBN has raised interest rates multiple times in 2024. The Monetary Policy Rate (MPR) increased from 18.75% in January to 27.50% in November, an aggressive move aimed at reducing excess cash in circulation.
CBN Governor Olayemi Cardoso acknowledged that high interest rates put financial pressure on households and businesses. However, he maintained that these measures are necessary to stabilize the economy.
Concerns About Rising Debt
Although increased credit access helps consumers manage short-term financial needs, economic experts warn that Nigeria must ensure responsible lending. The fear is that rising personal debt could lead to more defaults, where people are unable to repay their loans.
Experts have urged the CBN to find a balance between increasing credit availability and ensuring financial stability. If borrowing continues to rise unchecked, Nigeria could face a debt crisis that affects individuals, banks, and the overall economy.
Final Thoughts
The rise in consumer credit demonstrates how many Nigerians are struggling financially as a result of growing inflation. Economic measures that increase purchasing power, stabilise prices, and give citizens better financial prospects are the long-term answer, even while loans offer short-term respite.
