Digital Lending Surge in Nigeria: 425 Licensed Lenders Amid Concerns Over Indebtedness
The number of licensed digital lending companies in Nigeria has surged to 425 as of May 2025, a significant increase from 320 last year. This surge reflects the growing popularity and ease of entry into the digital lending space, with many companies either approved by the Federal Competition and Consumer Protection Commission (FCCPC) or licensed by the Central Bank of Nigeria (CBN). Of the 425 companies, 362 have received full approval from the FCCPC, while 42 operate with conditional approval, and 21 are licensed by the CBN. However, despite this growth, there are growing concerns about the rising levels of indebtedness among Nigerian borrowers.
The rapid growth of digital lenders has sparked issues with borrowing practices, particularly with the increase in people accumulating multiple loans without repaying them. Many borrowers move from one lender to another, amassing debt without addressing their financial obligations. Digital lenders, in an effort to attract more customers, have been dishing out loans without properly assessing credit histories. The efficiency of Nigeria’s credit bureaus, which track the borrowing behavior of Nigerians, is also under scrutiny. The reports from these bureaus are often delayed, leaving room for borrowers to acquire new loans before their previous debts are reported.
One of the major drivers of the rise in digital lenders is the ease of entry into the sector compared to more traditional financial services like microfinance. Many retired bankers are entering the space, seeking to remain active in the financial system. Digital lending provides a lower barrier to entry due to less stringent regulations compared to microfinance institutions, which have higher licensing costs and tighter regulations. However, this has led to a more competitive and aggressive market, with new players rapidly disbursing small loans to attract customers, which has contributed to the growing problem of defaulting borrowers.
In addition to these concerns, the Nigerian credit reporting system is facing significant challenges. Although credit bureaus are attempting to monitor and report the credit behavior of Nigerians, the system is not responsive enough to the demands of digital lenders, who need real-time credit data. Reports can take up to a month to reflect any changes, leaving borrowers the opportunity to take on new loans without their previous defaults being reported. This inefficiency has led to cases where individuals owe money to dozens of lenders without the issue being flagged by the system.
Despite the growing number of approved digital lenders, the market remains rife with unregistered and unapproved loan apps. These apps often engage in exploitative practices, including harassing borrowers and engaging in unethical debt recovery methods. The FCCPC has placed 88 loan apps on a watchlist and delisted 47 from the Google Play Store in an effort to clean up the sector. While digital lending plays an important role in Nigeria’s economy by providing easier access to credit, the government and regulators continue to work on improving the oversight and accountability of the industry to protect consumers and ensure its long-term sustainability.
Source: Nairametrics