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Hardship: Increasing numbers of Nigerians are choosing to take out loans in order to meet their financial needs.

In the first half of this year, H1’23, there was a 34 percent year-on-year increase in consumer loans secured by bank customers, reaching N2.64 trillion. This surge can be attributed to a growing demand from households that find themselves compelled to rely more on borrowing to navigate the escalating cost of living.

Household incomes are under strain due to sustained hikes in the prices of goods and services, driven by factors such as the depreciation of the naira, a shortfall in food supply, and other environmental circumstances, including security challenges.

The National Bureau of Statistics (NBS) recently reported a 10th consecutive monthly increase in the inflation rate, reaching 27.33 percent for October 2023, with food inflation recorded at 31.52 percent.

Banks contributed to the growth in consumer loans by implementing various measures, including digital innovations, streamlined processes with minimal documentation, improved product design and flexibility, as well as increased publicity and customer engagement.

Based on the latest data from the Central Bank of Nigeria (CBN), the 34 percent year-on-year growth observed in H1’23 is the highest recorded in four years, since 2019 when the central bank introduced measures to boost loans to the economy, including the Loan-To-Deposit Ratio (LDR) set at 65 percent.


As per the Central Bank of Nigeria’s Economic Report for the second quarter of 2023 (Q2’23), consumer loans increased to N2.64 trillion by the end of June 2023, up from N1.93 trillion at the close of June 2022. This signifies a substantial N704 billion or 34 percent year-on-year (YoY) growth during this period.

The growth observed is notably 31 percentage points higher than the 5.0 percent YoY growth reported at the end of June 2022. Additionally, there was a quarter-on-quarter (QoQ) increase of 12.2 percent in consumer loans from N2.35 trillion at the conclusion of Q1’23.

The Central Bank of Nigeria attributed the enhancement in consumer credit to an elevated demand for personal loans and the reinforced implementation of the Loan-to-Deposit Ratio (LDR) policy.

Regarding the LDR, the central bank declared in 2019: “All Deposit Money Banks (DMBs) are obligated to achieve a minimum LDR of 65% by December 31, 2019, and this ratio shall be subject to quarterly review. To promote SMEs, Retail, Mortgage, and Consumer Lending, these sectors shall be given a weight of 150% in calculating the LDR for this purpose.”

Analysts and banking experts, as reported by Financial Vanguard, attribute the growing demand for personal loans to the heightened cost of living, stemming from the persistent surge in prices of goods and services and the ongoing depreciation of the Nigerian currency.

Data from the National Bureau of Statistics (NBS) indicates that the more than 65 percent rise in inflation in October is primarily driven by increases in the prices of essential household items, including Food & Non-Alcoholic Beverages, Housing, Water, Electricity, Gas & Other Fuel.

Beyond factors such as food shortages due to insecurity and rising transportation costs, a significant contributor to the escalating prices of goods and services is the continual devaluation of the country’s currency.

The depreciation of the naira was exacerbated by reform measures implemented by the Central Bank of Nigeria on June 14th, 2023.

In the official market, the exchange rate climbed to N840.53 per dollar last week Wednesday from N471.67 per dollar on June 14th, indicating a 78 percent depreciation.

Similarly, the exchange rate in the parallel market increased to N1,155 per dollar from N768 per dollar on June 14th, 2023, reflecting a 50 percent depreciation.

Banks highlight that the resulting higher cost of living has sparked a significant surge in the demand for consumer loans.

Expert perspectives, insights from analysts

In response to this situation, a senior banking professional, speaking anonymously to Financial Vanguard, remarked, “There has been a continuous surge in the demand for loans across all consumer segments, with an almost 50% rise in the average loan amount sought by customers in the affluent categories.”

Providing insight into how the escalating trend in inflation is leading to heightened consumer loan demand, Tunde Abidoye, the Head of Equity Research at FBNQuest Securities Limited, explained, “The impact of increasing inflation and currency devaluation on the economy means a reduction in real income for households.

Consequently, households will need to explore alternative sources of income, often resorting to debt financing to fulfill their existing obligations. Some households may require interim financing, and this could be a contributing factor to the upswing in personal loans.”

He added, “Additionally, inflation denotes an increase in the cost of goods and services. As a result, households will incur higher expenses for their necessities. If the disposable income of households remains constant, they will seek additional sources of income, such as loans and borrowings.”

Adding their perspective, Oluwole Sole, a Sub-Saharan Africa Banking Analyst at Vetiva Capital Management Limited, remarked, “The upsurge in consumer loans is a response to heightened inflationary pressures, leaving consumers with limited alternatives to fulfill their immediate needs. Consequently, borrowing has become an appealing choice.”

Likewise, Atinuke Egwuatu, the Group Head of Consumer Lending at United Bank for Africa (UBA) Plc, explained that the growing demand for consumer loans is a consequence of the current economic conditions, manifested in the increased cost of living spurred by the depreciation of the naira.

She stated, “The rise in the cost of living has diminished customers’ purchasing capacity. Given the substantial increase in the cost of living, many customers find it challenging to cover day-to-day household expenses solely relying on their salaries. This has led them to seek financial assistance from their banks in anticipation of future salary payments.”

Egwuatu also highlighted the impact of the consistent devaluation of the naira against other currencies, noting, “Before the persistent devaluation of the naira relative to other currencies, individuals could accumulate funds to finance major projects.

However, with the ongoing devaluation, saving up funds for a project is less effective, as the projected cost may have significantly increased while saving, and the returns on the investment struggle to keep pace with the devaluation rate.

Consequently, consumers opt to secure additional funding to finance these projects and extend their repayments over an extended period.”

“Some individuals turn to securing personal loans from financial institutions to initiate a supplementary business or alternative income stream, enabling them to bolster their income streams and better navigate the challenging economic conditions currently prevailing in the country.”

The actions taken by banks

While the surge in consumer loans may be linked to economic conditions, investigations by Financial Vanguard reveal that banks have implemented strategies to enhance the accessibility and affordability of these loans for customers.

According to Njideka Esomeju, the Group Head of Consumer Banking at Access Bank PLC, some of these measures involve digitization, product design, flexibility, and increased marketing and visibility.

Discussing Access Bank’s initiatives in this regard, Esomeju stated, “As a bank, we have capitalized on technology and our early-mover advantage to expand consumer lending and cater to our large and growing customer base.

We consistently achieve incremental numbers and potential year-on-year growth through the simplification of loan applications, minimal or no documentation, and instant disbursement via digital platforms, including USSD short strings, Loan App, and a Web portal where human interaction is eliminated, and interactions are algorithm-driven, attracting individuals seeking swift financial solutions.

The transformative benefits of convenience and speed in this process have been significant.”

She added, “Personal loans are particularly appealing as they are applicable to a broad range of needs, including personal, financial, and lifestyle requirements.

The increasing demand for personal loans can also be attributed to their inclusivity in product design and target market definition – individuals with low, middle, and high incomes can request loans within their capacity.”

“Strategic and focused marketing initiatives aimed at raising awareness and increasing visibility of personal loan products have proven to be highly effective in influencing the adoption of loans.

Substantial marketing budgets directed toward both Above-The-Line communication and Below-The-Line messaging have been central to the consumer lending business and the growth of demand generation.”

Highlighting UBA’s endeavors in this area, Atinuke Egwuatu, the Group Head of Consumer Lending at United Bank for Africa (UBA) Plc, explained, “We engage in various communication activities regularly, utilizing channels such as SMS, Email, Social Media, Radio Jingles, traditional marketing outlets, and consistent one-on-one interactions with customers by our business relationship teams.

Earlier in the year, we also made improvements to the terms of our consumer loan products to enhance accessibility. Subsequently, we have observed a substantial increase in feedback and inquiries following these communications, leading to a rise in loan sales.”

A senior official from Union Bank, working in the Retail Segment, further elaborated, stating, “Union Bank provides straightforward and intelligent solutions to our customers’ financial service needs.

We offer loans tailored for every requirement, ensuring accessibility and personalization for eligible customers. Our diverse range of consumer loans addresses the needs of both existing and potential customers, as we continually expand risk acceptance criteria to accommodate a broader customer base.”

He continued, “We provide asset financing loans for new and used vehicles in collaboration with reputable vendors. We improve the quality of living by financing renewable energy solutions, ensuring customers have a reliable and uninterrupted power supply.

Collaborating with home developers, we offer affordable and luxury housing solutions, and we also provide Personal Loans for various financial needs such as rent, school fees, vacation plans, etc.

We actively engage with our customers, guiding them on eligible loan products and facilitating connections to convenient and budget-friendly financing opportunities. Our Workplace banking proposition, situated at customer locations nationwide, has spurred increased demand from customers.”



Peter Ritdung Wakkias is a Nigerian blogger and programmer, known for being the CEO of and He holds a Higher National Diploma in Computer Science from Isa Mustapha Agwai 1 Polytechnic Lafia. Based in Lafia, Nasarawa State.

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