Personal borrowing hits N1.99trn amid inflation

Personal loans owed by Nigerians to financial institutions climbed to a record N1.99trn in June 2026, as rising living costs and expensive credit pushed more households towards borrowing to meet their financial needs.

The outstanding balance increased by N58.5bn, or 3.03 per cent, in three months, from approximately N1.93trn recorded at the end of March, according to the Central Bank of Nigeria’s Second Quarter 2026 Economic Report.

The increase came as total consumer credit rose by 3.26 per cent to N3.17trn in the second quarter, from N3.07trn in the preceding quarter, representing an additional N100bn in household borrowing within three months.

The CBN said the growth reflected increases in both personal and retail loans.

“Consumer credit outstanding increased by 3.26 per cent to N3.17trn, from N3.07trn in the preceding quarter. The increase reflected growth in both retail and personal loans, which rose by 4.10 per cent and 3.03 per cent, respectively,” the report stated.

Personal loans accounted for 62.87 per cent of total consumer credit, while retail loans represented 37.13 per cent, indicating that nearly N63 out of every N100 owed by consumers to financial institutions was classified as personal borrowing.

Retail loans also increased by approximately N46.5bn to N1.18trn at the end of June, compared with an estimated N1.13trn in March.

Although retail loans recorded a faster quarterly growth rate, personal borrowing remained the dominant component of consumer credit.

The rising debt burden coincided with renewed inflationary pressures, which continued to erode household purchasing power.

The CBN reported that headline inflation rose to 15.91 per cent in June 2026 from 15.38 per cent in March, reflecting increases in the prices of essential goods and services.

The report attributed the inflationary pressures largely to higher energy and commodity prices linked to geopolitical tensions in the Middle East, which pushed up production and transportation costs.

The development further strained household budgets, particularly among Nigerians whose earnings had not kept pace with rising prices.

However, the CBN report did not establish whether the increase in personal loans was driven primarily by financial distress, consumption needs or improved access to credit.

Borrowing costs also remained elevated during the period.

Nigeria’s inflation drops to 14.63% in September — NBS

The CBN said the average prime lending rate declined marginally to 19.01 per cent in the second quarter from 19.37 per cent in the preceding quarter.

In contrast, the maximum lending rate increased slightly to 34.37 per cent from 34.34 per cent, indicating that credit remained expensive for some categories of borrowers.

Although the rates reflect general banking sector lending conditions rather than specific personal loan charges, they underscore the high cost of borrowing in the economy.

The rising consumer debt also mirrors a broader shift in how Nigerians use formal credit, with more borrowers turning to loans to meet daily needs rather than finance productive activities.

The 2026 Access to Financial Services in Nigeria Survey by Enhancing Financial Inclusion & Advancement (EFInA) found that 40.8 per cent of formal borrowers used loans mainly for coping and consumption purposes, up from 31.7 per cent in 2023.

The 9.1 percentage-point increase made consumption and coping the largest purpose of formal borrowing, overtaking productive enterprise loans, which declined from 40.2 per cent to 34.3 per cent during the period.

Borrowing for household assets also fell from 25.2 per cent to 23.4 per cent.

The survey warned that the changing pattern of credit use could undermine the role of borrowing in building productive capacity.

“Coping/consumption purposes rose from 31.7 per cent to 40.8 per cent; productive purpose fell from 40.2 per cent to 34.3 per cent. We need to ensure that credit builds productive capacity and does not produce distress,” it stated.

The survey further showed that formal credit use increased from six per cent of adults in 2023 to 10 per cent in 2026, with approximately 11.9 million Nigerians borrowing from regulated financial providers.

When informal sources were included, 36 per cent of adults had access to some form of credit.

Credit use among informally employed Nigerians tripled from five per cent to 15 per cent, while borrowing among people aged 18 to 35 rose from four per cent to 10 per cent.

Business owners also recorded an increase in credit use from four per cent to 10 per cent, while borrowing among farmers rose from two per cent to six per cent.

The figures suggest that while access to credit is expanding, a growing proportion of Nigerians are increasingly relying on loans to cope with financial pressures rather than invest in income-generating activities.