Nigerians Borrow More As Banks Face Growing Consumer-Credit Risk

By FIDELUS ZWANSON

Consumer Lending Enters a Critical Phase

NIGERIA’S consumer-credit market is expanding, but the latest figures are raising questions about what is driving that growth.

Personal loans reached an estimated ₦2.06 trillion in May 2026, representing 64.78 per cent of total outstanding consumer credit.

The figure emerged as total consumer credit increased from ₦3.13 trillion in April to ₦3.18 trillion in May.

That ₦50 billion monthly increase shows that household borrowing remains an important part of Nigeria’s credit market even as economic activity stays under pressure.

Personal Loans Lead the Expansion

Personal loans grew by 1.98 per cent in May, adding approximately ₦40 billion to the outstanding balance.

Retail loans, meanwhile, increased by 0.90 per cent and stood at about ₦1.12 trillion based on the reported consumer-credit structure.

The disparity matters because personal lending is increasingly becoming the dominant component of consumer credit.

For lenders, that expansion creates an opportunity to deepen retail banking and financial inclusion.

At the same time, however, it creates greater exposure to household repayment capacity.

The Economy Is Not Growing Fast Enough to Remove the Pressure

The broader economic environment remains challenging.

The CBN’s composite Purchasing Managers’ Index recorded 49.60 points in May, slightly above April’s 49.40 points but still below the 50-point threshold for expansion.

Subdued demand, declining new orders and high production costs contributed to the contraction.

Consequently, households and businesses are operating in an environment where income growth and economic activity remain constrained while essential expenses continue to exert pressure.

Inflation Complicates Household Repayment

Inflation adds another layer of risk.

Headline inflation increased from 15.69 per cent in April to 15.93 per cent in May, according to CBN data.

Although monthly inflation slowed to 1.75 per cent from 2.13 per cent, the overall cost environment remained difficult for households.

For borrowers, this creates a crucial distinction between obtaining a loan and being able to service it comfortably.

A household may secure credit today, but rising living expenses can reduce the income available for repayment tomorrow.

Borrowing Is Moving From Production to Consumption

The most significant concern may therefore be the changing purpose of credit.

The Access to Financial Services in Nigeria Survey found that 40.8 per cent of formal borrowers used loans for coping and consumption in 2026.

Three years earlier, the figure stood at 31.7 per cent.

Meanwhile, borrowing for productive activities fell from 40.2 per cent to 34.3 per cent.

That shift could weaken the broader economic impact of credit expansion.

Productive borrowing can finance businesses, equipment, agriculture and other activities that generate income. Consumption borrowing, by contrast, may solve an immediate financial problem without necessarily creating additional income to repay the debt.

Financial Inclusion Brings New Opportunities

Despite those concerns, the expansion of formal credit also signals progress in financial inclusion.

The share of adults using formal credit increased from six per cent in 2023 to 10 per cent in 2026.

About 11.9 million Nigerians reportedly borrowed from regulated financial institutions.

Including informal sources, 36 per cent of adults had access to some form of credit.

Younger Nigerians and workers outside the formal economy also increased their use of credit.

Among informally employed Nigerians, credit uptake tripled from five per cent to 15 per cent. Borrowing among those aged 18 to 35 rose from four per cent to 10 per cent.

Business owners increased from four per cent to 10 per cent, while farmers rose from two per cent to six per cent.

Repayment Stress Is the Warning Signal

The numbers become more concerning when repayment capacity is considered.

According to the survey, 45.8 per cent of formal-credit users experienced some or serious repayment stress.

Furthermore, 83.8 per cent reported ongoing financial stress.

That combination creates a potential pressure point for lenders.

If household incomes do not rise sufficiently, borrowers may struggle to meet repayment schedules. As a result, banks and other financial institutions could face higher delinquency and credit-risk exposure.

The issue is particularly important as digital and retail lending platforms make borrowing faster and more accessible.

What the ₦2.06trn Means for Banks

For banks, the growth in personal loans is neither automatically positive nor negative.

A larger consumer-loan book can diversify lending, increase interest income and bring more Nigerians into formal financial services.

However, the quality of those loans matters more than their volume.

If households borrow primarily to pay for food, transport, energy and other recurring expenses, lenders must assess whether borrowers have sufficient and sustainable income to service those obligations.

Consequently, stronger credit scoring, responsible lending and effective monitoring will become increasingly important.

The Bigger Question Is Loan Quality

Nigeria’s growing consumer-credit market ultimately presents a test for both lenders and regulators.

The country needs wider access to credit. However, it also needs credit that strengthens productive capacity and household resilience.

A rapid rise in personal borrowing without corresponding income growth could expose households to deeper financial stress and lenders to deteriorating asset quality.

Therefore, the ₦2.06 trillion personal-loan figure should be viewed not merely as evidence that Nigerians are borrowing more.

It is also a measure of how households are coping with economic pressure—and a signal that the sustainability of consumer credit will depend increasingly on income growth, responsible lending, effective consumer protection and the quality of banks’ loan portfolios.