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By Daniel Adaji
Amid mounting economic pressures, Nigerians secured personal loans amounting to N470bn from banks within the last three months of 2024, the Central Bank of Nigeria has revealed.
This was disclosed in the Fourth Quarter 2024 Economic Report released by the apex bank on Monday, which highlighted the rising demand for personal loans despite high borrowing costs and inflationary pressures.
According to the report, consumer credit outstanding rose by 11.06 per cent to N4.72tn at the end of December 2024, compared to N4.25tn recorded at the end of September 2024. The surge in personal loans accounted for the bulk of this increase in consumer credit.
While personal loans saw a significant increase, retail loans experienced a sharp decline, dropping by 18.18 per cent to N0.90tn from N1.10tn at the end of September 2024. This shift underscores a growing preference for personal loans over retail credit, reflecting changing borrowing behaviors among Nigerians.
The CBN report revealed that personal loans made up a dominant share of the consumer credit portfolio, accounting for 80.98 per cent, while retail loans constituted the remaining balance.
The report stated, “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 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 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. Many Nigerians are turning to bank loans to meet financial obligations amid inflationary pressures and higher costs of living.
Despite the significant increase in personal loans, the CBN report also highlighted Nigeria’s high-interest rate environment, which has made borrowing more expensive.
During the fourth quarter of 2024, the CBN maintained a tight monetary policy stance in response to persistent inflationary pressures. The headline inflation rate rose to 34.80 per cent in December 2024, up from 34.60 per cent in November, driven mainly by festive season demand, particularly for food and non-alcoholic beverages.
To combat inflation, the CBN’s Monetary Policy Committee implemented multiple rate hikes throughout the year, raising the Monetary Policy Rate by a total of 875 basis points to 27.50 per cent in 2024. Consequently, commercial banks increased interest rates on personal loans, making borrowing more costly for individuals.
Despite these rising borrowing costs, the demand for personal loans has continued to climb, reflecting the financial struggles of many Nigerians who rely on credit to navigate the tough economic climate.