Personal loans hit N2.06trn as Nigerians borrow to cope with rising costs

Personal loans obtained by Nigerians rose to an estimated N2.06 trillion in May 2026, accounting for nearly two-thirds of total consumer credit, as households increasingly turned to borrowing amid persistent cost pressures and weak consumer spending.

The latest Economic Report of the Central Bank of Nigeria showed that total consumer credit outstanding increased by 1.60 percent from N3.13tn in April to N3.18 trillion in May, representing an additional N50bn in one month.

Personal loans accounted for 64.78 percent of the total consumer credit, while retail loans made up the remaining 35.22 percent.

Based on the CBN’s reported proportions, personal loans stood at approximately N2.06 trillion, while retail loans were about N1.12 trillion.

Personal lending also recorded stronger growth during the month, rising by 1.98 percent, or roughly N40 billion, compared with a 0.90 percent increase in retail loans.

The development points to a growing reliance on unsecured or personal borrowing to meet household financial needs at a time when purchasing power remains under pressure.

The increase in consumer borrowing occurred against a backdrop of weak economic activity. The CBN’s composite Purchasing Managers’ Index stood at 49.60 points in May, although this was marginally higher than 49.40 points in April, remaining below the 50-point threshold that separates expansion from contraction.

The apex bank attributed the contraction to subdued demand, declining new orders and elevated production costs, while weak consumer spending and higher energy costs continued to weigh on the industry and services sectors.

Inflation also remained elevated during the period, with headline inflation rising to 15.93 percent in May from 15.69 percent in April, according to the CBN. Although month-on-month inflation slowed from 2.13 percent to 1.75 percent, households continued to face high living costs.

The rising dependence on consumer credit is also reflected in the latest Access to Financial Services in Nigeria Survey, which showed a significant shift in the purpose of borrowing among Nigerians.

The survey found that 40.8 percent of formal borrowers used loans for coping and consumption in 2026, up from 31.7 percent in 2023.

Conversely, borrowing for productive activities declined from 40.2 percent to 34.3 percent over the same period, raising concerns about the quality and economic impact of credit expansion.

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The survey warned that credit growth should build productive capacity rather than increase financial distress.

Formal credit usage nevertheless expanded, rising from six per cent of adults in 2023 to 10 percent in 2026, with about 11.9 million Nigerians borrowing from regulated financial institutions.

When informal sources were included, 36 percent of adults had access to some form of credit.

Credit uptake among informally employed Nigerians tripled from five per cent to 15 percent, while borrowing among Nigerians aged 18 to 35 increased from four per cent to 10 percent. Borrowing among business owners rose from four per cent to 10 percent, while farmers increased from two per cent to six percent.

However, the expansion of credit has come with significant repayment risks.

The survey showed that 45.8 percent of formal-credit users experienced some or serious repayment stress, while a much larger 83.8 percent reported ongoing financial stress.

For banks and other lenders, the trend presents a mixed picture. Rising consumer lending could provide an important avenue for credit growth and financial inclusion, but the increasing use of loans for consumption rather than productive investment could raise credit-risk concerns if household incomes fail to keep pace with debt obligations.

The shift also underscores the importance of responsible lending, effective credit assessment and stronger consumer protection as financial institutions expand retail and digital lending.

With personal loans now accounting for almost two-thirds of outstanding consumer credit, sustained growth in household borrowing could become an increasingly important factor for banks’ loan books and asset quality, particularly if inflation and household financial stress remain elevated.

This version can also be sharpened further into a more hard-hitting banking/investor angle, focusing on rising consumer-credit risk, loan quality and what the N2.06 trillion means for banks’ asset quality.