Nigeria’s consumer credit outstanding rose sharply by 26.29% to N4.42 trillion in November 2024, up from N3.5 trillion recorded in October, according to the latest data from the Central Bank of Nigeria (CBN). The increase is largely driven by inflation expectations, as more Nigerians turned to credit to cope with rising living costs.
The CBN’s Monthly Economic Report revealed that personal loans, primarily used for household expenses, saw the most significant growth, surging by 37.76% to N3.32 trillion from N2.41 trillion in October. This category accounted for 74.95% of total consumer credit. Meanwhile, retail loans, which are used for purchasing goods and services, experienced a modest increase of 1.83%, rising to N1.11 trillion from N1.09 trillion in the previous month. Retail loans made up the remaining 25.05% of total consumer credit.
Inflationary Pressures Drive Credit Demand
Analysts attribute the surge in consumer credit to the persistent inflationary pressures eroding household purchasing power. With inflation reaching multi-year highs, many Nigerians are increasingly relying on personal loans to cover essential expenses such as rent, food, healthcare, and education. The slower growth in retail loans suggests that while consumer spending remains robust, high prices may be discouraging discretionary spending on non-essential goods and services.
The CBN report highlighted that the rise in consumer credit reflects the broader economic challenges faced by households. “Consumer credit outstanding increased significantly by 26.29% to N4.42 trillion from the level in the preceding month, due largely to inflation expectations,” the report stated.
CBN’s Policy Measures and Economic Outlook
The increase in consumer credit aligns with the CBN’s efforts to promote financial inclusion and improve access to credit. However, concerns about rising debt levels and repayment sustainability have emerged, particularly as interest rates remain high.
In 2024, the CBN, under Governor Olayemi Cardoso, implemented multiple interest rate hikes to combat inflation. The Monetary Policy Rate (MPR) was raised by a cumulative 875 basis points, moving from 18.75% at the start of the year to 27.50% by November. While these measures aim to stabilize the economy by reducing excess liquidity, they have also increased borrowing costs for households and businesses.
Governor Cardoso has acknowledged the challenges posed by high interest rates but emphasized that these steps are necessary to rein in inflation. Economic experts, however, have called for a balanced approach to ensure that credit expansion does not lead to higher default rates or financial instability.
Bottom Line
The sharp rise in Nigeria’s consumer credit underscores the impact of inflation on household finances, with many Nigerians turning to loans to manage rising costs. While the CBN’s policies aim to stabilize the economy, the surge in borrowing highlights the need for measures that support financial stability and sustainable credit growth. As inflationary pressures persist, the central bank faces the dual challenge of curbing inflation while ensuring that increased borrowing does not exacerbate economic vulnerabilities.
