Nigeria’s worsening cost-of-living crisis is pushing more households into borrowing, with digital lending platforms charging interest rates approaching 50 per cent monthly, raising concerns about growing debt burdens and the financial difficulties facing millions of citizens.
Digital loan disbursements in Nigeria reached $1.63 billion in 2025, reflecting the growing dependence on short-term credit as households struggle to cope with rising food prices, transportation costs, rent, healthcare expenses and other basic needs.
Unlike in previous years, when digital lending platforms were still expanding their operations, some lenders now charge nearly 20 per cent interest on one-month loans, while borrowers with poor credit ratings may face even higher rates.
An investigation found that OPay, through its EaseMoni lending platform, charges low-risk borrowers approximately 18.9 per cent monthly interest.
When compounded over 12 months, the rate translates to an effective annual interest rate of about 698 per cent, excluding additional charges and fees.
Similarly, a new PalmPay customer reportedly received an offer carrying a daily interest rate of 1.5 per cent. If compounded daily, this would amount to an effective monthly rate of approximately 56.3 per cent.
Some other digital lending platforms reportedly charge borrowers with poor credit ratings monthly interest rates approaching 25 per cent.
The situation has raised concerns about the financial implications of borrowing through digital applications, particularly for Nigerians who depend on these facilities to meet urgent household expenses.
Beyond the interest charges, borrowers who fail to repay their loans on time may face additional penalties calculated daily on the outstanding principal and accumulated interest.
In some cases, borrowers who default for extended periods could end up repaying several times the amount originally borrowed.
The growing popularity of digital lending has also exposed the increasing dependence of Nigerians on short-term credit to survive the current economic difficulties.
OPay Dominates Nigeria’s Digital Lending Market
OPay has emerged as one of the biggest players in Nigeria’s digital lending industry, accounting for an estimated 57.4 per cent of the total value of digital loans disbursed in the country in 2025.
The company’s latest filing with the United States Securities and Exchange Commission showed that it disbursed $927.63 million in new loans during the first half of 2026, representing a 204 per cent increase compared with the $305.12 million recorded during the corresponding period in 2025.
The number of its quarterly borrowers also increased significantly, rising from 3.5 million to 6.7 million within one year.
OPay generated $236.12 million in income from lending activities during the first half of 2026, exceeding the $130.55 million it earned from payment-related services.
The company provides personal loans as well as credit facilities to micro, small and medium-sized businesses.
Other financial technology companies are also expanding their lending operations.
Moniepoint Microfinance Bank reportedly disbursed more than ₦1 trillion in loans to small businesses in 2025, while FairMoney Microfinance Bank recorded loan disbursements exceeding ₦150 billion during the same period.
Moniepoint’s Chief Executive Officer, Tosin Eniolorunda, had also indicated that credit services would play a major role in the company’s next phase of growth.
More Nigerians Borrowing to Meet Daily Expenses
The expansion of digital lending is happening against the background of declining purchasing power and increasing household expenses.
Findings from the 2026 Access to Financial Services in Nigeria survey conducted by Enhancing Financial Innovation and Access (EFInA) showed that more Nigerians are taking loans to finance consumption rather than productive activities.
According to the survey, 40.8 per cent of formal borrowers obtained loans mainly to meet household expenses and other consumption needs in 2026, compared with 31.7 per cent in 2023.
However, the proportion of borrowers who obtained loans for productive businesses declined from 40.2 per cent to 34.3 per cent within the same period.
The survey also showed that formal financial inclusion increased from 64 per cent in 2023 to 73 per cent in 2026.
Formal credit usage similarly increased from six per cent to approximately 10 per cent, representing about 11.9 million Nigerians.
Despite the improved access to financial services, repayment difficulties remain a major concern.
The survey, which covered 18,679 adults between April and June 2026, found that 45.8 per cent of formal credit users experienced some level of repayment stress, with only 30.7 per cent of financially included adults classified as financially healthy.
The findings suggest that increased access to loans does not necessarily translate into improved financial well-being.
High Cost of Living Deepens Borrowing Pressure
The growing dependence on digital loans is also linked to the increasing cost of maintaining a modest standard of living in Nigerian cities.
A cost-of-living analysis published by The Guardian on September 21, 2026, estimated that a single urban worker required approximately ₦372,300 monthly to live modestly, significantly higher than the national minimum wage of ₦70,000.
Workers surveyed reportedly spent an average of ₦4,500 daily on transportation, amounting to approximately ₦99,000 over 22 working days.
The analysis also estimated the monthly cost of a basic healthy diet at ₦47,670.
Meanwhile, a worker allocating ₦125,000 monthly towards housing would still need to save separately to meet annual rent payments, which are commonly demanded upfront.
Although Nigeria’s headline inflation rate declined to 14.63 per cent in September 2026 from 15.39 per cent in August, food inflation remained high at 19.59 per cent.
Lagos recorded the highest state food inflation rate at 34.4 per cent.
The International Monetary Fund’s 2026 Article IV report also estimated that 63 per cent of Nigerians were living below the national poverty line, while approximately 27 million people faced food insecurity during the latter part of 2025.
These economic pressures have made short-term loans attractive to households that need immediate financial assistance to pay for food, transportation, medical bills, school fees and rent.
Nearly 500 Digital Lending Apps Approved
The Federal Competition and Consumer Protection Commission (FCCPC) has granted full or conditional approval to nearly 500 digital money-lending applications operating in Nigeria.
However, more than 100 illegal or non-compliant lending platforms have reportedly been flagged, blacklisted or removed from the Google Play Store over allegations involving privacy violations, harassment and other unethical lending practices.
Although the expansion of regulated lending platforms has improved access to credit, concerns remain over excessive interest rates, aggressive debt recovery practices and loan refinancing.
The FCCPC introduced the Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations (DEON) 2025 to strengthen consumer protection.
The regulations address registration requirements, disclosure of loan terms, lending practices and debt recovery procedures.
Experts Call for CBN Intervention
The Chairman of the Alliance for Economic Research and Ethics, Dele Oye, has called on the Central Bank of Nigeria (CBN) and other relevant authorities to intervene over digital lenders charging annual interest rates exceeding 300 per cent.
In a statement titled The Mathematics of Marginalisation: Decoding Nigeria’s Poverty Premium, Oye argued that low-income Nigerians were being forced to pay more for basic necessities and financial services because they lacked access to affordable alternatives.
He explained that wealthier households could purchase goods in bulk and benefit from lower prices, while poorer families often had to buy smaller quantities at higher costs.
According to him, the same disadvantage affects access to credit, as financially vulnerable Nigerians increasingly depend on digital lending platforms with expensive interest charges and additional fees.
Oye cited cases where borrowers received ₦65,000 but were required to repay ₦93,000 within seven days.
He added that penalties could increase the repayment amount to as much as ₦158,000 when borrowers defaulted.
He warned that such lending practices could trap financially struggling Nigerians in a cycle of debt and called for stronger consumer protection measures and consideration of interest-rate limits.
Analysts Warn Against Rising Household Debt
Vice-President of Highcap Securities, David Adonri, said the expansion of digital lending should be viewed against Nigeria’s longstanding shortage of accessible consumer credit.
He explained that fintech companies were taking advantage of their extensive customer networks to provide credit facilities that traditional financial institutions had not adequately supplied.
However, he cautioned against attributing the entire growth of digital lending to the current economic crisis, noting that the industry was still developing and could expand further as more Nigerians became aware of available credit services.
The Head of Research and Strategy at GTI Group, Abiodun Ogunniyi, said OPay’s figures indicated that the average amount borrowed by customers was also increasing.
He noted that loan disbursements increased by 204 per cent, while the number of quarterly borrowers grew by approximately 91 per cent.
Ogunniyi added that investors would increasingly assess OPay as a major credit provider rather than simply a digital payment platform.
Meanwhile, Senior Research Analyst at BudgIT, Victor Ejechi, linked the growing dependence on digital loans to stagnant real incomes and increasing pressure on household budgets.
He distinguished between productive borrowing, which generates returns capable of covering borrowing costs, and consumption borrowing, which is mainly used to meet immediate financial needs.
According to him, while productive loans can support economic activities, borrowing to finance daily consumption may only postpone financial difficulties while increasing the borrower’s debt burden.
Ejechi called for clearer communication of loan conditions, full disclosure of interest charges and policies that encourage productive borrowing.
He also stressed the need to address the underlying economic challenges facing households, including rising food prices, housing costs, healthcare expenses and education fees, alongside improvements in workers’ real wages.
Financial expert Iswell Emmanuel also warned that lenders could increase interest rates to compensate for expected loan defaults, meaning customers who repay their loans may indirectly bear some of the costs associated with borrowers who fail to repay.
OPay Faces Growing Loan Default Risks
The rapid expansion of digital lending is also creating financial risks for the companies involved.
OPay’s latest financial figures showed a significant increase in provisions for expected credit losses during the first half of 2026.
The company’s provisions for expected credit losses increased by 210.3 per cent to $118.36 million, representing 25.3 per cent of its revenue, compared with 19.3 per cent recorded a year earlier.
OPay also wrote off $113.15 million in loans during the period, representing a 520.5 per cent increase compared with the corresponding period of the previous year.
The amount was also higher than the $69.95 million in loans written off throughout the whole of 2025.
The figures suggest that although the lending business is generating substantial revenue, the increasing number of borrowers is also exposing the company to higher default risks.
OPay acknowledged in its SEC filing that interest rates on some of its Nigerian credit products were higher than those typically charged in other markets.
However, the company maintained that the rates were permitted under Nigerian law and broadly consistent with those of competitors.
It also warned that regulatory restrictions requiring lower interest rates, stronger borrower protections or withdrawal from certain lending segments could affect its revenue and future growth.
Financial literacy advocate Oluwatosin Olaseinde similarly cautioned investors against assessing OPay solely as a payment services provider, noting that its expanding lending operations exposed the company to additional credit and regulatory risks.
With millions of Nigerians increasingly relying on digital loans to meet basic needs, analysts have warned that access to credit must be accompanied by affordable interest rates, transparent lending conditions and stronger consumer protection.
They stressed that while digital loans can provide temporary financial relief, excessive borrowing costs could worsen household financial difficulties and push vulnerable Nigerians deeper into debt.
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