The Central Bank of Nigeria (CBN) has reported that Nigerian banks disbursed a total of N470 billion in personal loans during the last quarter of 2024. This development underscores the increasing reliance on consumer credit amid prevailing economic conditions.
According to the apex bank’s Fourth Quarter 2024 Economic Report, released on Sunday, total consumer credit outstanding rose by 11.06 per cent to N4.72 trillion at the end of December 2024, up from N4.25 trillion in September. This significant growth reflects the heightened demand for personal financing.
The report revealed that personal loans saw a notable increase of 21.27 per cent, reaching N3.82 trillion compared to N3.15 trillion recorded in the preceding quarter. This segment accounted for the bulk of the consumer credit expansion. In contrast, retail loans declined by 18.18 per cent to N0.90 trillion from N1.10 trillion in September 2024, indicating a shift in borrowing patterns toward personal credit facilities.
Breakdown of Consumer Credit Trends
CBN data further revealed that personal loans constituted the dominant share of consumer credit, representing 80.98 per cent, while retail loans accounted for the remaining portion.
The report stated:
“Consumer credit outstanding rose by 11.06 per cent to N4.72 trillion at end-December 2024, from N4.25 trillion at end-September 2024. Personal loans increased by 21.27 per cent to N3.82 trillion compared with the level at end-September 2024.
Retail loan, however, declined by 18.18 per cent to N0.90 trillion from N1.10 trillion at end-September 2024. A breakdown indicated that personal loans, with a share of 80.98 per cent, remained dominant, while retail loans accounted for the balance.”
The surge in personal loans is attributed to factors such as rising living costs, economic uncertainties, and easier access to credit facilities offered by commercial banks. The trend suggests that more Nigerians are turning to banks for financial support amid inflationary pressures and the rising cost of essential goods and services.
Impact of Inflation and Policy Measures
The increase in personal loans occurred against the backdrop of Nigeria’s rising inflation, which reached 34.80 per cent in December 2024, up from 34.60 per cent in November. This inflationary pressure was largely driven by higher consumer demand during the festive season, particularly for food and non-alcoholic beverages.
To combat persistent inflation, the CBN’s Monetary Policy Committee implemented several rate hikes throughout 2024, raising the Monetary Policy Rate (MPR) by a cumulative 875 basis points to 27.50 per cent. As a result, commercial banks adjusted their lending rates accordingly, making personal loans more expensive for borrowers.
While personal loans provide immediate financial relief, the higher interest rates raise concerns about repayment burdens, especially among low-income earners and individuals with unstable income sources. Analysts warn that rising borrowing costs could lead to an increase in loan defaults.
Improvement in Banks’ Asset Quality
Despite the growing concerns about loan affordability, the CBN report highlighted an improvement in the asset quality of banks. The non-performing loans (NPL) ratio fell to 4.50 per cent in December 2024, down from 4.58 per cent in September. This figure remains below the prudential benchmark of 5.00 per cent, indicating improved loan recoveries and financial stability within the banking sector.
As the Nigerian economy continues to navigate inflationary challenges and monetary policy adjustments, the demand for personal loans is expected to remain high. However, financial analysts advise borrowers to consider the long-term implications of rising interest rates and potential repayment difficulties when seeking credit facilities.
