Nigeria’s worsening cost-of-living crisis is pushing millions of households into a debt trap, as digital lenders raise the cost of loans to offset rising defaults.
Digital loan disbursements reached $1.63 billion in 2025. Lenders now charge nearly 20 per cent interest on one-month loans, far above the rates they charged when they began operations.
Key figures
- Low-risk OPay borrowers pay 18.9 per cent monthly interest.
- OPay accounted for 57.4 per cent of Nigeria’s $1.63 billion digital loans in 2025.
- Nearly 500 digital lending apps have been approved by the FCCPC.
- Dele Oye of the Alliance for Economic Research and Ethics has asked the CBN to intervene.
- Analysts warn of mounting household debt risks.
Rates and charges
Checks by The Guardian show that OPay charges low-risk borrowers 18.9 per cent monthly interest on its EaseMoni platform. Compounded monthly, that translates to an effective annual rate of about 698 per cent, excluding fees and other charges.
A new PalmPay customer said he was offered a daily interest rate of 1.5 per cent. Compounded daily, that equals an effective monthly rate of about 56.3 per cent.
Borrowers with poor credit ratings face even higher rates, with some approaching 25 per cent monthly. A user of one app who had never borrowed through it said she was offered 19.2 per cent monthly.
Default penalties, often calculated as percentages of principal and accrued interest, may be applied daily unless the debt is formally restructured. Borrowers who default for long periods may end up repaying several times what they borrowed.
Most digital lenders also do not treat early repayment differently. Borrowers pay the principal plus the full tenor interest even if they settle a day after disbursement.
OPay’s lending boom
OPay has grown from a payments-focused fintech into a major consumer-credit provider. Its filing with the US Securities and Exchange Commission (SEC) shows:
- New loan disbursements rose 204 per cent to $927.63 million in the first half of 2026, from $305.12 million a year earlier.
- Quarterly borrowers rose about 91 per cent to 6.7 million, from 3.5 million.
- Loan income reached $236.12 million, overtaking the $130.55 million earned from payment services.
- Its $938.3 million in new loans in 2025 made up 57.4 per cent of the $1.634 billion total digital loan disbursements.
Other fintechs are also expanding credit. Moniepoint Microfinance Bank said it disbursed over N1 trillion to small businesses in 2025, while FairMoney Microfinance Bank disbursed more than N150 billion.
The FCCPC has fully or conditionally approved nearly 500 digital lending apps. More than 100 illegal or non-compliant platforms have been flagged, blacklisted or delisted from the Google Play Store over privacy violations, harassment and other abuses.
Borrowing to meet daily needs
Credit growth does not directly prove a link to the cost-of-living crisis. Some observers say it reflects longstanding gaps in access to formal credit, while others worry about repayment as real incomes shrink.
The 2026 Access to Financial Services in Nigeria survey by EFInA, weighted by the National Bureau of Statistics (NBS), shows a shift towards consumption borrowing:
- 40.8 per cent of formal borrowers borrowed mainly for expenses or consumption, up from 31.7 per cent in 2023.
- Borrowing for productive enterprise fell from 40.2 per cent to 34.3 per cent.
- Formal financial inclusion rose to 73 per cent of adults, from 64 per cent in 2023.
- Formal credit use rose from six per cent to about 10 per cent, or 11.9 million people.
- 45.8 per cent of formal-credit users reported some or serious repayment stress.
- Only 30.7 per cent of formally included adults were classified as financially healthy.
The survey covered 18,679 adults between April and June 2026. Credit Direct’s 2025 report also listed rent, medical bills and school fees among the reasons Nigerians borrow.
The Guardian’s cost-of-living analysis of September 21, 2026 estimated that a single urban worker needs N372,300 monthly to live modestly, against a national minimum wage of N70,000. Workers spend an average of N4,500 daily on commuting, or N99,000 over 22 working days. A basic healthy diet costs N47,670 monthly, and rent is often demanded a year in advance.
Headline inflation eased to 14.63 per cent in September from 15.39 per cent in August, according to the NBS. Food inflation stayed high at 19.59 per cent, with Lagos recording the highest state rate at 34.4 per cent.
The International Monetary Fund’s 2026 Article IV report estimated that 63 per cent of Nigerians live below the national poverty line, and that 27 million people faced food insecurity in late 2025.
What analysts say
Vice-President of Highcap Securities, David Adonri, said the growth should be seen against Nigeria’s long-standing shortage of consumer finance. He noted that President Bola Tinubu’s administration had promised to expand access to affordable consumer credit, and that fintechs have used their retail networks to fill a gap left by traditional institutions.
Adonri cautioned against attributing the expansion wholly to the crisis. “This growth trajectory could be a natural course rather than a development caused by the country’s cost-of-living crisis,” he said. He added that digital loans had become a bridge for consumers in desperate situations, and that the extended-family system remains an important source of support. He warned that the figures need proper disaggregation before being read as a measure of poverty.
Head of Research and Strategy at GTI Group, Abiodun Ogunniyi, said the gap between 204 per cent disbursement growth and 91 per cent borrower growth suggests the average loan per borrower has risen. He said investors would increasingly view OPay as a creditor rather than a payments platform.
BudgIT Senior Research Analyst Victor Ejechi linked the credit expansion to stagnant real incomes and mounting household pressure. He said productive borrowing generates returns above the cost of credit, while consumption borrowing may only postpone a shortfall and add interest. He called for clearer marketing, full disclosure of borrowing costs and policies that encourage productive use of loans, and said lasting relief requires tackling the costs of food, rent, healthcare and education while improving real wages.
Financial expert Iswell Emmanuel said lenders can price credit to cover expected defaults, leaving repaying borrowers to bear part of the cost of those who do not.
Calls for CBN intervention
Dele Oye, Chairman of the Alliance for Economic Research and Ethics, urged the CBN and other authorities to act against digital lenders charging annual rates above 300 per cent. In a statement titled The Mathematics of Marginalisation: Decoding Nigeria’s Poverty Premium, he argued that poor households pay more for necessities and financial services because they lack liquidity and affordable alternatives.
“The fundamental disadvantage of low income is the inability to access economies of scale,” he said.
He cited cases in which borrowers received N65,000 but had to repay N93,000 within seven days, with penalties pushing the debt to as much as N158,000 after default. He urged regulators to consider interest-rate caps and stronger consumer protection.
Risks for lenders and investors
OPay’s filing acknowledged that rates on some Nigerian credit products are higher than those typically charged in other markets. It said the rates are permitted under Nigerian law and broadly in line with competitors, and warned that rules requiring lower rates, stronger borrower protections or withdrawal from some segments could hurt revenue and growth.
Its provisions for expected credit losses rose 210.3 per cent to $118.36 million in the first half of 2026, equal to 25.3 per cent of revenue, up from 19.3 per cent a year earlier. It also wrote off $113.15 million in loans, a 520.5 per cent increase and more than the $69.95 million written off in all of 2025.
Financial literacy advocate Oluwatosin Olaseinde cautioned investors against judging OPay by the familiarity of its payments app, saying its lending business carries credit-default and regulatory risks beyond those of payments.
Regulation
The FCCPC introduced the Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations (DEON) 2025 to strengthen protection for users of digital lending. The rules cover registration, disclosure of loan terms, lending practices and debt recovery, following complaints of harassment, data breaches and unethical collection methods.
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