KEY POINTS

• The number of approved digital loan apps in Nigeria has surged by 80%, driven by rising demand for quick loans.
• Nigerians’ total debt appetite has reached N7.5 trillion, fueled by economic pressures and inflation.
• Increased borrowing reflects the struggle to cope with rising living costs and declining purchasing power.

The increase in the number of Proposed and approved digital loans app in Nigeria, shows an indicating of higher demand for quick credit in Nigeria.

The rise, which is expected to be 80%, is due to the rising cost of living and inflation that has seen more Nigerians seek to access financial services through these platforms.

According to the National Information Technology Development Agency (NITDA), the number of digital lending apps has increased significantly due to the increasing demand.

Nigerians’ total credit exposure is now at N7.5 trillion as the economic challenges force borrowers to turn to these fast and easy credit products.

Rising demand for quick loans

The increase in loan apps is as a result of the worsening economic situation in Nigeria. With inflation rates still on the rise and purchasing power shrinking, more people are looking for quick money fixes.

These online lending companies have been embraced due to their simplicity and short time to disburse funds to those in need of funds.

As the number of people who cannot access credit from the conventional banking system increases in Nigeria, digital lenders are a lifesaver.

Their easy-to-meet borrowing criteria and fast processing time have attracted millions of users, most of whom experience increasing costs for food, transportation, and shelter.

Business Day also noted that the approval of loan apps has also increased alongside growing questions on the legal framework of the apps.

Although peer-to-peer lending has offered working capital, there are vices such as high-interest rates, forceful collections, and infringement of customers’ rights because of little regulation.

Inflation and economic pressure leading to borrowing

Inflation rate in Nigeria is still high, which is still a worry in the country’s debt consumption. The general inflationary trend in the prices of basic commodities and services has placed a lot of pressure on consumers, most of whom are now living on credit.

There are current statistics indicating that today’s inflation rate is approximately 25% and appears to remain high in near future.

The situation has been made worse by the devaluation of the naira and consistent supply chain shocks, which have raised the cost of borrowing and reduced the value of the average Nigerian’s dollar.

In this regard, the increased rate of borrowing, through digital loan apps, is a pointer to the depth of the country’s problems.

Need for regulatory oversight

Even though many users quickly got access to funds via digital loan platforms several issues came with it due to the lack of regulation in the sector.

It is therefore not surprising that the consumer groups/financial gurus have shifted their focus towards demanding more intensity of specific legislation from the government in order to ensure consumers against abusive credit.

Some borrowers have complained of very high interest rates which put them in a cycle of borrowing that they cannot easily break.

Some are pushing regulators to set rules that call for digital lenders to be forthcoming about their practices, with rates that are reasonable and consumer safeguards.

If left unchecked, digital lending could deepen the woes of vulnerable borrowers, as already struggling financially, they will be at the receiving end of high risk debt.

Hope for economic stability

However, there is the possibility that the increase in the digital lending platforms could lead to increased financial inclusion in Nigeria.

If more people can be provided with credit, the probability for a corresponding increase in investment and even the creation of new ventures will improve the economy.

However, issues for responsible lending and improved regulatory continue to rise to ensure that the borrower is not exploited during the time of disaster.

The developments that will help shape Nigeria’s financial markets in the future lie in the ability to meet the need for credit as well as the growing need for consumer protections against debt traps.

It is believed that in the future, policymakers will pay more attention to the creation of a sound credit structure that is conducive to the development of lending and borrowing in a more stable economy.