Nigerians Struggle as Consumer Credit Surges to N3.05 Trillion Amid Rising Inflation

The increasing cost of living has driven Nigerians to borrow approximately N740 billion from banks between January and September this year. An analysis of the Central Bank of Nigeria’s (CBN) quarterly economic reports reveals that consumer credit surged from N2.31 trillion in the fourth quarter of 2022 to N3.05 trillion by the end of the third quarter of 2023, marking a 32% increase or N740 billion in nine months, reflecting the challenges of inflation and diminished purchasing power faced by Nigerians.

The trend of rising consumer credit has been consistent throughout the year, with a steady quarterly increase. Consumer credit rose by 1.7% to N2.35 trillion in the first quarter of 2023 from N2.31 trillion in the fourth quarter of 2022. It further increased to N2.6 trillion in the second quarter of 2023, reflecting a quarterly growth of 10.6%. By the third quarter of 2023, there was a significant quarterly increase of 17%, reaching an all-time high of N3.05 trillion.

Personal loans constitute the majority of consumer credit, accounting for 74.8%, while retail loans make up the remaining 25.2%, according to the CBN’s Q3 2023 quarterly economic report. The report attributes the growth in consumer credit to the need to cope with the rising cost of living. Personal loans increased by 18.6% to N2.28 trillion, compared to N1.92 trillion in the previous quarter, while retail loans grew by 7.3% to N766.97 billion.

The country’s inflation rate has been on the rise, with forecasts indicating a potential 30% rate by December 2023. This inflationary pressure has resulted in challenges for Nigerians, including increased costs of essentials such as food, fuel, and rent. The World Bank estimates that inflation has pushed an additional four million Nigerians into poverty in the first five months of this year, adding to the existing 133 million Nigerians already living in multidimensional poverty.

As inflation persists, there is a growing risk of more Nigerians falling into poverty, prompting an increasing number of people to turn to borrowing to meet their daily needs. A report by SBM Intelligence found that 27% of Nigerians across various income levels are resorting to loan apps to sustain their living expenses in the face of rising inflation.

Source: Nairametrics