Skyrocketing Living Expenses Drive Nigerians to Secure N740 Billion in Bank Loans Over Nine Months

The escalating cost of living has propelled Nigerians to seek financial relief, resulting in a substantial borrowing trend that saw approximately N740 billion being borrowed from banks between January and September of the current year. This revelation emerges from a meticulous examination of the quarterly economic reports provided by the Central Bank of Nigeria (CBN).

The data elucidates a discernible surge in consumer credit, which catapulted from N2.31 trillion at the close of the fourth quarter of 2022 to an elevated N3.05 trillion by the conclusion of the third quarter of 2023. This translates to a notable escalation of 32%, equivalent to the aforementioned N740 billion, within a mere nine months. The surge in consumer credit aligns with the ongoing struggle of Nigerians grappling with persistent inflationary pressures and diminishing purchasing power.

The trajectory of consumer credit exhibits a consistent upward trajectory throughout the year, reflecting the economic challenges faced by Nigerians. Commencing with a modest 1.7% increase to N2.35 trillion in the first quarter of 2023, up from the N2.31 trillion recorded in the preceding quarter of 2022, the subsequent quarter witnessed a more substantial surge. By the second quarter of 2023, consumer credit had escalated to N2.6 trillion, marking a notable quarterly increase of 10.6%. The momentum persisted into the third quarter, with a further quarterly increase of 17%, culminating in an unprecedented high of N3.05 trillion.

Delving into the composition of consumer credit, the Central Bank’s Q3 2023 quarterly economic report reveals that personal loans constitute the lion’s share, accounting for 74.8% of the total, while retail loans make up the remaining 25.2%. The CBN attributes this surge in consumer credit to the imperative need to cope with the relative upswing in the cost of living. The report highlights that consumer credit burgeoned by 15.5% to reach N3.05 trillion, compared to the N2.64 trillion recorded at the conclusion of the previous quarter. Further analysis discloses an 18.6% increase in personal loans, totaling N2.28 trillion, as opposed to the N1.92 trillion in the preceding quarter. Simultaneously, retail loans experienced a 7.3% growth, reaching N766.97 billion. In terms of composition, personal loans retained the majority share at 74.8%, leaving retail loans with the remaining 25.2%. As a proportion of total sectoral credit from Other Depository Corporations (ODCs), consumer credit ascended to 7.8%, up from 7.0% in the previous quarter.

The pervasive inflationary trend in the country has been a significant driver behind the burgeoning consumer credit scenario. With indications pointing toward a potential 30% inflation rate by December 2023, Nigerians find themselves grappling with soaring costs across various facets of life, including food, fuel, and rent. The World Bank underscores the impact of inflation, revealing that an estimated four million more Nigerians slipped into poverty within the first five months of the current year. This adds to the existing challenge, with approximately 133 million Nigerians already classified as multidimensionally poor. If the inflationary pressures persist, there is an alarming risk of a more substantial portion of the population descending into poverty. Against this backdrop, the recourse to borrowing has become a pragmatic means for many Nigerians to navigate their daily needs.

A comprehensive report by SBM Intelligence sheds light on the coping mechanisms adopted by Nigerians across different income strata. The report indicates that 27% of Nigerians, spanning various income categories, resort to loan apps as a pragmatic solution to sustain their living expenses amid the relentless surge in inflation. This underscores the pivotal role that borrowing plays in the lives of Nigerians, serving as a financial lifeline to bridge the gap created by the increasing cost of living. As inflation continues to exert its toll on the economic landscape, it is imperative to monitor how these borrowing trends evolve and their implications for the financial stability and well-being of the Nigerian populace.