The Central Bank of Nigeria’s (CBN) latest economic report reveals a significant surge in personal loan uptake, with Nigerians borrowing a substantial N470 billion from banks in the fourth quarter of 2024. This rise, detailed in the CBN’s Fourth Quarter 2024 Economic Report released on Sunday, underscores a growing reliance on personal credit amidst challenging economic conditions.
The report indicates that consumer credit outstanding climbed by 11.06 percent to N4.72 trillion by December 2024, up from N4.25 trillion in September. A striking aspect of this growth is the 21.27 percent increase in personal loans, which reached N3.82 trillion. This surge, compared to the previous quarter’s N3.15 trillion, highlights a clear preference for personal loans over other forms of credit.
“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,” the CBN report stated.
Conversely, retail loans experienced an 18.18 percent decline, falling to N0.90 trillion from N1.10 trillion. This shift suggests a clear preference for personal loans, which now constitute 80.98 percent of the consumer credit portfolio.
The driving forces behind this surge are multifaceted. Rising living costs, economic uncertainties, and increased access to credit facilities from commercial banks are likely contributing factors. As one might observe, the sustained demand for personal loans also reflects consumers’ attempts to manage financial obligations amid inflationary pressures.
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However, this increase in personal loan uptake coincides with rising inflation. Nigeria’s headline inflation rate reached 34.80 percent in December 2024, up from 34.60 percent in November. This inflationary pressure, driven by heightened festive season demand, has prompted the CBN to implement several rate hikes. The Monetary Policy Rate (MPR) rose by a total of 875 basis points to 27.50 percent, leading commercial banks to adjust lending rates upwards.
This increase in lending rates inevitably makes personal loans more expensive. While these loans offer short-term financial relief, they also pose the risk of increased repayment burdens, particularly for low-income earners.
Despite these concerns, the CBN report indicates positive trends in asset quality. The non-performing loans ratio fell to 4.50 percent in December 2024, down from 4.58 percent in September, remaining below the 5.00 percent prudential benchmark. This suggests that banks are managing loan recoveries effectively.
As economic pressures persist, the trend of increased personal loan uptake is likely to continue. It will be crucial for both borrowers and lenders to navigate this landscape prudently, balancing the need for financial relief with the risks of increased debt burdens.
