Nigeria’s consumer credit market has suffered a major ₦939 billion decline, highlighting growing pressure on household spending and raising fresh concerns about economic growth, business activity and job creation. Data from the Central Bank of Nigeria (CBN) showed that outstanding consumer credit fell by 19.89 percent from ₦4.722 trillion in 2024 to ₦3.783 trillion in 2025, marking the first annual decline since December 2019.
The sharp drop came as high interest rates and tighter lending conditions made borrowing increasingly expensive for Nigerians. Personal loans recorded the biggest setback, plunging by 115.46 percent to ₦1.847 trillion. Retail loans, however, moved in the opposite direction, climbing 63.77 percent to ₦1.935 trillion and accounting for more than half of total consumer credit. Analysts say banks have become more cautious, particularly when lending to people without formal salaries, collateral or easily traceable sources of income.
For households, the credit squeeze is arriving at a difficult time as the cost of essentials continues to consume a larger share of disposable income. Muda Yusuf, chief executive of the Centre for the Promotion of Private Enterprise, said the problem is not necessarily that Nigerians are unwilling to borrow, but that the financial system does not make consumer lending accessible or affordable enough. With individuals reportedly facing borrowing rates of more than 30 percent in some cases, many consumers are choosing to cut spending rather than take on expensive debt.
The impact is also being felt by retailers and manufacturers that rely heavily on consumer demand. Economist Kabir Isah said businesses are reducing inventory, favouring cheaper products and negotiating faster payment terms as weak purchasing power and expensive working capital squeeze their operations. Analysts warn that if consumers continue to spend less, manufacturers and retailers could see weaker sales, potentially reducing investment and limiting new job opportunities. Nigeria’s relatively small consumer-credit market may cushion the immediate economic impact, but experts say the contraction remains an important warning sign for policymakers.
Still, there could be a path to recovery. Financial analyst Mayowa Amoo expects consumer lending to improve in 2026 as bank recapitalisation strengthens lenders’ capacity and new initiatives expand access to mortgages and vehicle financing. Experts have also called for stronger support for the Nigerian Consumer Credit Corporation (CrediCorp), wider lending through banks and microfinance institutions, and government-backed credit guarantees to reduce lenders’ fear of defaults. For Nigeria, the challenge is finding the right balance between controlling inflation and ensuring that the cost of credit does not become so high that ordinary households and businesses are effectively locked out of the financial system.
Source: BUSINESS DAY
