Nigerians borrowed an unprecedented N4.82 trillion from banks between January and March 2024 as the soaring cost of living forced many to seek financial relief. This significant surge in borrowing is detailed in the First Quarter 2024 Economic Report published by the Central Bank of Nigeria (CBN), which highlights the growing reliance on consumer credit amidst escalating inflationary pressures.
According to the report, consumer credit in Nigeria increased by 268.9%, reaching N8.24 trillion by the end of March 2024, compared to N3.42 trillion in December 2023. This dramatic rise in borrowing reflects the severe financial strain on households as they struggle to cope with the rising costs of basic necessities.
The bulk of this borrowing was driven by personal loans, which saw a staggering 270.4% increase, amounting to N7.52 trillion by March 2024. Retail loans also saw substantial growth, rising by 253.4% to N721.13 billion. Personal loans accounted for a dominant 91.2% of the total consumer credit, highlighting the urgent financial needs of individuals during this challenging economic period.
The report emphasized that this surge in consumer credit is largely attributable to inflation expectations, as Nigerians increasingly turn to loans to manage their day-to-day expenses. As of March 2024, consumer credit constituted 15.5% of total sectoral credit, nearly doubling from 7.7% in December 2023.
The trend towards personal loans becoming the primary source of consumer credit has been ongoing, with their share steadily increasing over the past year. In March 2023, personal loans represented 74.54% of total consumer credit, and by March 2024, this figure had grown to 91.25%. In contrast, the share of retail loans has declined sharply, reflecting a shift in consumer priorities towards meeting immediate personal financial needs rather than retail or commercial investments.
This borrowing spree comes against the backdrop of soaring inflation rates, which have seen Nigeria’s headline inflation rise from 28.92% in December 2023 to 33.2% in March 2024. The relentless rise in prices has pushed an additional 10 million Nigerians into poverty, according to a World Bank report. While there was a slight decrease in the inflation rate to 33.40% in July 2024, the economic environment remains challenging for many Nigerians.
As the cost of living continues to rise, the reliance on consumer credit is likely to persist, further deepening the financial challenges faced by many households across the country.
