The Central Bank of Nigeria (CBN) has revealed that Nigerians secured personal loans amounting to N470 billion from banks within the last three months of 2024.
This was disclosed in the Fourth Quarter 2024 Economic Report released by the apex bank.
According to the report, consumer credit outstanding rose by 11.06% to N4.72 trillion at the end of December 2024 from N4.25 trillion recorded at the end of September 2024.
The substantial increase reflects a growing reliance on personal loans amid prevailing economic conditions.
The report indicated that personal loans increased significantly by 21.27%, reaching N3.82 trillion compared to the N3.15 trillion reported at the end of the preceding quarter.
This surge in personal loan accounts for the bulk of the consumer credit growth recorded within the period.
However, while personal loans saw a remarkable increase, retail loans declined by 18.18% to N0.90 trillion from N1.10 trillion at the end of September 2024.
The decline in retail loans highlights a shift in borrowing patterns, with more individuals seeking personal loans compared to retail credit.
Personal loans dominate consumer credit portfolio
The CBN report further revealed that personal loans constituted a dominant share of the consumer credit portfolio, accounting for 80.98%, while retail loans made up the remaining balance.
This indicates that personal loans remain the preferred form of consumer credit among Nigerians, as individuals increasingly turn to bank loans to address financial needs.
The report read, “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 the end of September 2024.
“Retail loan, however, declined by 18.18 per cent to N0.90 trillion from N1.10 trillion at endSeptember 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 surge in personal loans is likely linked to several factors, including rising living costs, economic uncertainties, and increased access to credit facilities by commercial banks. The sustained demand for personal loans could also be linked to consumers’ efforts to meet financial obligations amid inflationary pressures and higher costs of living.
The increase in personal loans also reflects banks’ willingness to extend credit to individuals, especially as the demand for retail loans diminishes
Rising credit demand despite higher borrowing costs
Despite the surge in personal loans, the CBN’s report also highlighted the prevailing high-interest rate environment, which has made borrowing more expensive.
- During the fourth quarter of 2024, the CBN maintained a tight monetary policy stance driven by persistent inflationary pressures.
- However, the surge in personal loans occurred amid rising inflation in Nigeria, with the headline inflation rate reaching 34.80% in December 2024, up from 34.60% in November, driven mainly by festive season demand, particularly for food and non-alcoholic beverages.
- To address persistent inflationary pressures, the CBN’s Monetary Policy Committee implemented multiple rate hikes throughout the year, raising the Monetary Policy Rate (MPR) by a total of 875 basis points to 27.50% in 2024.
As a result, commercial banks increased interest rates on personal loans, making borrowing more expensive for individuals.
