In its Fourth Quarter 2024 Economic Report, the Central Bank of Nigeria (CBN) revealed that Nigerians secured N470 billion in personal loans from banks during the last quarter of 2024. This surge brought the total consumer credit outstanding to N4.72 trillion by December 2024, reflecting an 11.06% increase from the previous quarter. The report highlighted that personal loans, which increased by 21.27% to N3.82 trillion, were the primary driver of this credit growth.
The rise in personal loans, which now constitute 80.98% of total consumer credit, suggests a shift in borrowing preferences among Nigerians. While personal loans have surged, retail loans saw a decline of 18.18%, falling to N0.90 trillion. This shift points to a growing reliance on personal loans over retail credit, with many individuals opting for bank loans to meet their financial needs in the face of mounting economic challenges.
The growing demand for personal loans can be attributed to factors such as rising living costs, inflationary pressures, and the increasing availability of credit facilities from banks. The report notes that personal loans have become a preferred solution for many individuals grappling with inflation and higher costs of living. However, this surge has coincided with a rise in inflation, with the headline inflation rate reaching 34.80% in December 2024, up from 34.60% the previous month.
Despite the surge in personal loans, concerns remain about the potential impact of higher interest rates, which have been adjusted upward in response to inflationary pressures. The CBN’s decision to increase the Monetary Policy Rate (MPR) by 875 basis points to 27.50% in 2024 has made loans more expensive. While the asset quality of banks improved, with non-performing loans falling to 4.50%, there are fears that the increased cost of loans may lead to higher repayment burdens, especially among low-income earners, potentially resulting in more loan defaults.
Source: Punch