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Nigeria’s personal loan portfolio surged by 37.76% to N3.32 trillion in November 2024, reflecting the growing financial strain on households due to inflation and rising living costs, according to the latest monthly report from the Central Bank of Nigeria (CBN).
The sharp increase in consumer borrowing highlights the increasing reliance on credit to meet essential expenses such as rent, healthcare, education, and household needs. The report revealed that personal loans jumped from N2.41 trillion in October to N3.32 trillion in November, marking one of the most significant monthly increases in recent years.
Personal loans now make up 74.95% of total consumer credit, underscoring the dependence on unsecured loans amid economic uncertainty. Similarly, overall consumer credit outstanding rose by 26.29%, reaching N4.42 trillion in November from N3.50 trillion in the previous month. Retail loans, covering credit for asset financing and consumer durables, also saw a modest increase of 1.83%, rising from N1.09 trillion in October to N1.11 trillion.
The sustained rise in consumer credit reflects the broader impact of inflation on household finances, with many Nigerians turning to short-term loans despite the high cost of borrowing. The report attributed the sharp increase in personal loans to inflation expectations, which continue to erode purchasing power.
“Consumer credit outstanding increased significantly by 26.29% to N4.42 trillion from the previous month, largely due to inflation expectations. Personal loans grew by 37.76% to N3.32 trillion from N2.41 trillion at the end of October 2024. Similarly, retail loans increased by 1.83% to N1.11 trillion from N1.09 trillion in the preceding month,” the report stated.
Despite high borrowing costs, loan demand has remained robust, driven by economic conditions that have forced many individuals to seek credit for daily expenses. The report also noted that higher interest rates on savings and fixed deposits have encouraged banks to expand lending, despite elevated borrowing costs.
The sharp increase in personal loans comes amid the CBN’s aggressive monetary tightening under Governor Olayemi Cardoso, who has overseen multiple interest rate hikes in 2024 to curb inflation. The Monetary Policy Rate (MPR) has risen by a total of 875 basis points, climbing from 18.75% at the beginning of the year to 27.50% by November.
This policy approach aims to stabilize the economy by reducing excess liquidity, although it has placed additional pressure on households and businesses. Cardoso has acknowledged the strain caused by high interest rates but maintains that these measures are essential to controlling inflation.
He has also suggested that if inflation shows consistent improvement, a downward adjustment in interest rates could be considered. However, inflation remains a significant concern, with the National Bureau of Statistics reporting a 34.80% rate in October 2024.
The CBN’s Monetary Policy Committee has reiterated its commitment to containing inflation and ensuring economic stability, signaling that further policy adjustments may be necessary to achieve these goals.
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