- The Central Bank of Nigeria said Nigerians borrowed N470 billion in personal loans from banks in the last three months of 2024
- It said consumer credit outstanding rose by 11.06 per cent from N4.25 trillion in September to N4.72 trillion at the end of December 2024
- The CBN said personal loans account for 80.98 per cent of consumer credit portfolio in the period under review
The Central Bank of Nigeria (CBN) disclosed that Nigerians borrowed personal loans amounting to N470 billion from banks in the last three months of 2024.
This was contained in the CBN’s Fourth Quarter 2024 Economic Report, which was released over the weekend.
The report showed that consumer credit outstanding rose by 11.06 per cent from N4.25 trillion at the end of September 2024 to N4.72 trillion at the end of December 2024.
It also showed that personal loans increased by 21.27 per cent, from N3.15 trillion at the end of September 2024 to N3.82 trillion at the end of December 2024.
According to the report, while personal loans increased, retail loans fell by 18.18 per cent from N1.10 trillion at the end of September 2024 to N90 billion.
Personal loans account for 80.98% of consumer credit portfolio
The report also revealed that personal loans accounted for 80.98 per cent of the consumer credit portfolio, while retail loans made up the remaining balance.
This disparity indicates that personal loans remained the preferred form of consumer credit among Nigerians, as individuals turned to bank loans to meet their financial needs.
“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.
“Retail loan, however, declined by 18.18 per cent to N0.90 trillion from N1.10 trillion at end-September 2024.
“A breakdown indicated that personal loans, with a share of 80.98 per cent, remained dominant, while retail loans accounted for the balance,” the report stated.
Factors responsible for rise in personal loans
The rise in personal loans is likely due to factors such as increasing living costs, economic uncertainties, and greater access to credit facilities by commercial banks.
Another factor that may be responsible for the surge in personal loans is consumers’ efforts to meet financial obligations despite inflationary pressures and higher costs of living.
The increased demand for personal loans comes amid rising inflation in Nigeria, as headline inflation rate reached 34.80 per cent in December 2024, up from 34.60 per cent in November, driven primarily by increased demand during the festive season, particularly for food and non-alcoholic beverages.
CBN implemented monetary tightening measures
Recall that the CBN’s Monetary Policy Committee (MPC) hiked the interest rate six consecutive times in 2024, raising the Monetary Policy Rate (MPR) by a total of 875 basis points from 18.75 per cent in January to 27.50 per cent in November 2024, to curb persistent inflationary pressures.
As a result, commercial banks adjusted their lending rates to reflect the higher MPR, making personal loans more expensive for individuals.
While personal loans may offer short-term financial relief, the higher interest rates could lead to increased repayment burdens for borrowers.
There are concerns that as personal loans become more costly, there could be a rise in loan defaults, especially among low-income earners and individuals with unstable income sources.
This is even as the CBN said lenders, including commercial banks and other financial institutions, recorded higher default rates for secured, unsecured, and corporate loans in the fourth quarter (Q4) of 2024.
However, the CBN report noted that banks’ asset quality improved as the non-performing loans ratio fell to 4.50 per cent in December 2024 from 4.58 per cent in September, staying below the 5.00 per cent prudential benchmark, indicating better loan recoveries.
Consumer credit rises to N4.42 trillion in November 2024 due to inflation expectations
Meanwhile, TheRadar earlier reported that consumer credit rose to N4.42 trillion in November 2024, a 26.29 per cent increase from the N3.5 trillion recorded in October 2024.
This is according to the latest Monthly Economic Report of the Central Bank of Nigeria (CBN), noting that the increase was largely driven by inflation expectations, which pushed individuals to seek more credit to meet their financial needs.
