Between January and March of this year, Nigerians borrowed over N4.82 trillion from banks due to the country’s growing cost of living.
The amount of outstanding consumer credit in Nigeria increased from N3.42 trillion in December 2023 to N8.24 trillion by the end of March 2024, a 268.9% increase, indicating the extreme financial hardship that rising inflation has placed on Nigerians.
This is stated in the Central Bank of Nigeria’s (CBN) First Quarter 2024 Economic Report.
Consumer credit is dominated by personal loans
According to the research, a notable increase in both personal and retail loans was the main factor for the spike in consumer credit.
The majority of consumer credit, however, is made up of personal loans, which will increase by 270.4% to N7.52 trillion by the end of March 2024.
Likewise, there was a noteworthy 253.4% surge in retail loans, amounting to N721.13 billion.
This increase suggests that people are using credit more frequently to handle their personal affairs, with personal loans making up the majority of consumer credit – 91.2% – in this regard.
The report said as follows: “Consumer credit outstanding increased by 268.9 percent to N8,240.36 billion at the end of March 2024, compared to December 2023. The significant increase in consumer credit can be attributed to predictions of inflation.”
“A disaggregation of consumer credit showed that personal loans increased by 270.4 per cent to N7,519.2 billion, while retail loans increased by 253.4 per cent to N721.13 billion. With a 91.2 percent share, personal loans continued to be the largest component of consumer credit, with retail loans making up the remaining portion.
“By the end of December 2023, consumer credit climbed to 15.5% of total sectoral credit, up from 7.7%.”
The News Chronicles also noted that personal loans have been a constant dominant force in consumer finance, with a constantly growing share.
Retail loans made up 25.46% of total consumer credit as of March 2023, while personal loans made up 74.54%.
The percentage of personal loans increased throughout the ensuing months, hitting 77.53% by December 2023 and 91.25% by March 2024.
On the other hand, the percentage of retail loans has decreased significantly, falling from 25.46% in March 2023 to just 8.75% by the same month the next year.
This change demonstrates the rising reliance on personal loans as the main source of consumer credit, which is probably a reflection of people’s pressing financial requirements in an increasingly difficult economic climate.
The drop in the proportion of retail loans raises the possibility that consumers are more concerned with getting money for urgent personal needs than with using it for business or retail.
What to note
Many Nigerians are moaning under the weight of the soaring costs of everything from food to fuel and rent as a result of the rising inflation.
Nigeria’s headline inflation rate increased by 14.80% in the first quarter of 2024, from 28.92% in December 2023 to 33.2% in March 2024.
According to World Bank research, 10 million Nigerians fell into poverty in 2023 as a result of growing inflation and low salaries.
Nigeria’s headline inflation rate dropped from 34.19% in June 2024 to 33.40% in July 2024, despite the fact that it is still high, according to a recent National Bureau of Statistics (NBS) report. The headline inflation rate has not decreased since December 2022, when it last did so, to 21.34%.
