In November 2024, Nigeria’s personal loan portfolio saw a dramatic increase of 37.76%, rising to N3.32 trillion, according to the Central Bank of Nigeria (CBN) report. This growth marks one of the most significant monthly increases in recent years, reflecting the growing financial strain on households. The surge is largely attributed to inflation and escalating living costs, which have driven many Nigerians to rely on credit to meet basic financial needs.
The CBN report revealed that personal loans now make up nearly 75% of total consumer credit. The sharp rise in personal loans from N2.41 trillion in October to N3.32 trillion in November highlights the widespread need for unsecured borrowing to cover essential expenses such as rent, healthcare, education, and day-to-day living costs. The figures underscore the increased dependency on consumer loans amid a challenging economic environment.
Consumer credit outstanding also experienced significant growth, rising 26.29% from N3.50 trillion in October to N4.42 trillion in November. The report noted that retail loans, which finance assets and consumer durables, saw a modest increase of 1.83%, reaching N1.11 trillion. This ongoing expansion of consumer credit further reflects the widespread financial difficulties facing Nigerian households.
Despite high borrowing costs, demand for loans remains strong, driven by inflationary pressures. Many individuals continue to turn to financial institutions for short-term loans to meet daily expenses. Higher interest rates on savings and fixed deposits have also encouraged banks to increase lending, despite the elevated cost of borrowing.
The rise in personal loans comes during a period of aggressive interest rate hikes by the CBN, aimed at curbing inflation. The Monetary Policy Rate has been increased by 875 basis points in 2024, from 18.75% in January to 27.50% in November. CBN Governor Olayemi Cardoso has acknowledged the challenges posed by high interest rates but emphasized the necessity of these measures to stabilize the economy. While inflation remains a pressing issue, the CBN continues to pursue a tough stance to ensure long-term economic stability.
SOURCE: PUNCH