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Written by on December 28, 2023

Nigeria’s consumers, stung by the sharp bite of inflation, are turning to banks with record frequency, sending loan demand to its highest level in nearly four years. Official data from the Central Bank of Nigeria (CBN) reveals a dramatic surge in borrowing, fueled by shrinking incomes and the struggle to make ends meet.

Consumer credit climbed a staggering 16.9% in August compared to July, reaching a total of N2.99 trillion. This surge is even more stark on a year-over-year basis, with an increase of 23.1% from N2.43 trillion in August 2022.

Personal loans are driving this trend, accounting for a whopping 75.4% of the total credit extended. This suggests that Nigerians are primarily seeking to cover everyday expenses and personal needs, rather than investing in business or major purchases. The remaining 24.6% comes from retail loans, further highlighting the pressure on household budgets.

This record-breaking loan demand reflects the harsh realities of Nigeria’s current economic climate. Inflation, currently hovering around 20%, has significantly eroded purchasing power, forcing many people to rely on credit to maintain their standard of living.

However, experts warn that this rapid increase in borrowing raises concerns about potential debt risks. With interest rates also on the rise, the ability of consumers to manage their repayments could be challenged. While banks may see short-term profits from the loan boom, the long-term implications for both borrowers and the economy remain to be seen.

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