Instant loans dry up as FCCPC rules force lenders toward safer borrowers

Nigeria’s digital lending industry is undergoing a significant shift as lenders scale back unsecured instant loans and increasingly target borrowers with verifiable income, established credit histories and predictable cash flows.

The change is being driven by a combination of tighter regulatory requirements under the Federal Competition and Consumer Protection Commission’s (FCCPC) Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations, 2025, rising default risks and the growing cost of originating and recovering small loans.

Stakeholders who spoke to Nairametrics said the new regulatory environment has made it more difficult for lenders to rely on aggressive debt recovery practices or extend credit to borrowers whose ability to repay cannot be established.

Instead, lenders are increasingly moving towards structured instalment loans, longer tenures and business financing, where repayment can be linked to identifiable sources of income or verifiable business cash flows.

What they are saying

Speaking with Nairametrics, CEO of KwikPay Credit and President of the Money Lenders Association, Mr. Gbemi Adelekan, said the industry is moving away from unsecured nano loans, typically with a maximum tenure of about 30 days, because of the high default rates associated with the model.

• “Digital lenders like KwikPay Credit are moving away from the unsecured nano instant loans due to the high default rate to a more tenured and structured instalment loan with certainty of source and deduction of income,” he said.

According to him, lenders are now focusing on business loans with verifiable cash flow and financial transactions.

Also speaking, an executive of a digital lending company, who asked not to be named, said the company has reduced its exposure to unsecured lending and is concentrating more on customers with demonstrated repayment capacity.

• “This is not the time to gamble on borrowers who just want to get money out of desperation and who do not even think of repayment,” the executive told Nairametrics.
• “We are now shifting attention to credible customers while we do less of unsecured loans to avoid bad debts because under the current regulation, you cannot use any unethical means to recover debt.
• “The worst a registered lender can do is to blacklist them. But while that may stop them from getting loans elsewhere, it does not bring back the money owed the lender,” he added.

The economics of nano loans

For digital lenders, the challenge extends beyond regulation and borrower behaviour. The underlying economics of nano lending have also become increasingly difficult.

Speaking with Nairametrics, CEO of Sycamore, Babatunde Akin Moses, said lenders have to consider the full cost of originating, underwriting, monitoring and recovering loans before determining whether a small credit product remains commercially viable.

• “The economics have become much harder, and I think one thing people sometimes miss is that lending is not only about giving out the money,” he said.
• “You have to consider what it takes to originate the loan, underwrite the customer, monitor the loan, recover the money and still make a reasonable profit,” he added.

He illustrated the challenge by comparing a N1 million loan to a single borrower with distributing the same amount in N5,000 loans.

• “If I lend N1 million to one customer, I have one customer to assess and manage. But if I want to lend that same N1 million as N5,000 loans, I now have 200 customers,” he said.

According to him, those 200 borrowers still have to be onboarded, assessed, monitored and followed up for repayment, potentially requiring relationship officers, recovery agents and technology infrastructure.

The operating cost, he said, can therefore become disproportionately high relative to the value of each individual loan.

Moses said the challenge is compounded by fraud, recovery difficulties, funding costs, regulatory requirements and changes in customer behaviour.

• “This doesn’t mean there is no need for nano credit. There is a huge need for small, short-term credit, particularly among people who are underserved by traditional financial institutions,” he said.

Demand for loans on the rise

Meanwhile, the shift to digital lenders comes even as demand for digital credit continues to rise amid pressure on household incomes and the increasing cost of living.

According to Adelekan, loan applications have increased as Nigerians seek short term credit to supplement their incomes.

The FCCPC’s intervention has also significantly changed the risk associated with loan recovery.

Adelekan said unethical collection practices have reduced considerably since the Commission began enforcing stricter requirements on digital lenders.

He said unregistered lenders are increasingly finding it difficult to operate through mainstream digital platforms because app stores and payment platforms enforce regulatory requirements imposed on lending businesses.

• “Yes, it has drastically,” he said when asked whether unethical practices in the industry had reduced.
• “Unregistered lenders are unable to use mainstream platforms like Apple Store or Play Store to display their apps due to the strict requirements from FCCPC that are enforced by the third party platforms, including payment platforms in Nigeria,” he said.

He said the FCCPC has adopted a zero-tolerance approach towards harassment and other abusive recovery practices, with sanctions for lenders found to be engaging in such conduct.

Registered lenders surge to 525

Amid the implementation of the FCCPC rule, which mandates registration for all digital lenders in the country, checks by Nairametrics show that the number of lenders registered with the Commission has increased to 525.

Aside from the 525 fully approved by the FCCPC, there are 33 other digital lenders granted registration waivers by the Commission because they are already licensed by the Central Bank of Nigeria (CBN).

Most of the registered companies operate more than one app, bringing the total loan apps under the watch of the FCCPC to over 1,000.

Meanwhile, a total of 112 loan apps are currently under the watchlist of the Commission, while 54 apps have been deleted from the Google Play Store for violating the regulator’s rules.

What you should know

The regulatory shift is rooted in the FCCPC’s Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations, 2025, commonly referred to as the DEON Regulations.

• The rules came into effect on July 21, 2025, under the Federal Competition and Consumer Protection Act, 2018, following concerns over exploitative lending practices, data privacy breaches, harassment and abusive debt recovery methods in Nigeria’s digital lending market.
• The implementation of the regulations was, however, interrupted by a legal challenge.
• The Wireless Application Service Providers Association of Nigeria (WASPAN) filed Suit No. FHC/L/CS/760/2026 against the FCCPC, challenging the regulations and provisions relating to the Commission’s regulatory powers.
• The legal uncertainty ended on July 20, 2026, when Justice Allagoa dismissed WASPAN’s suit in its entirety and declined the reliefs sought by the association.

The court upheld the validity of the DEON Regulations and found that they were made within the FCCPC’s statutory and constitutional powers. It also upheld the specific provisions challenged in the suit and discharged the interim order that had prevented implementation and enforcement.

Following the judgment, the FCCPC announced the immediate resumption of implementation and enforcement of the regulations.