Living on credit: Can installment finance cushion harsh economy for Nigerians?

…Buy-now-pay-later schemes to reach $2.61bn by 2030, Report says

… Interest rate, unreliable data threat to credit finance – Analysts 

Nigeria’s economy is slowly finding its footing after the shock therapy of recent reforms. Inflation, which spiked sharply in 2023 and 2024 following subsidy removal and exchange rate adjustments, has begun to ease. Macroeconomic indicators suggest a fragile stabilisation. Yet, for millions of Nigerians, the easing of headline figures has not translated into relief at the market stalls or in their homes. Rents are rising, transport costs stay elevated, and wages have barely moved. For many households, survival has become a daily calculation of what can be postponed, downgraded or abandoned altogether.

This disconnect between macroeconomic stabilisation and lived reality underscores a deeper problem: weak purchasing power. Even as prices decelerate, households lack the income growth needed to regain lost ground. The economy, critics argue, may be healing, but it is leaving many behind.

As Nigerians grapple with shrinking incomes, a growing school of thought suggests that survival in the interim may depend less on wage growth and more on access to credit. If households cannot immediately afford homes, cars, education or durable goods outright, could structured consumer credit systems allow them to spread costs over time and ease the burden?

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Buy-Now-Pay-Later (BNPL) schemes, mortgages and asset-backed loans are increasingly being discussed as coping mechanisms in a high-cost economy. A report, The State of Enterprise 2025 by EnterpriseNGR, highlights how rapidly such models are gaining traction. According to the report, Nigeria’s BNPL market grew at a compound annual growth rate of 23.1 percent between 2021 and 2024 and is projected to expand from $1.42 billion in 2024 to $2.61 billion by 2030. Already, many Nigerians rely on installment plans to purchase mobile phones, laptops and household electronics.

Analysts believe the model could go further, extending beyond gadgets into more tangible asset ownership such as housing, vehicles and even education.

Supporters argue that such systems reflect economic realities. With stagnant wages and high living costs, spreading payments over time may be the only way many working Nigerians can access basic needs. Yet, they warn that credit is not a silver bullet in an economy still burdened by inflation, informality and high interest rates.

At the heart of Nigeria’s purchasing power problem lies its labour structure. Simon Samson, chief economist at ARKK Economics and Data Limited, points to the dominance of informal employment as a fundamental constraint. “The majority of Nigerians work informally with little room for improving productivity,” he explains. “Even if you are able, it is not without exorbitant cost. Furthermore, this sector is unregulated, hence unfair practices abound such as low wages and unfavourable working conditions.”

These structural weaknesses mean that even as inflation slows, incomes are not rising fast enough to catch up. Underemployment remains widespread, skills often do not match available jobs, and double-digit inflation continues to erode what little purchasing power households retain. In such an environment, credit can appear less like an option and more like a lifeline.

Government-backed initiatives offer glimpses of what structured credit could achieve. The Nigerian Education Loan Fund (NELFUND), launched to expand access to tertiary education, has disbursed N161.97 billion to over 864,000 students nationwide since 2024. For many families, student loans have replaced outright payment of tuition fees, spreading costs over time and reducing immediate financial pressure.

Similarly, the MOFI Real Estate Investment Fund (MREIF) represents an attempt to address Nigeria’s massive housing deficit through long-term financing. Structured as a public-private partnership, the fund provides mortgage loans at a competitive interest rate of 9.75 percent, with tenures of up to 20 years and a minimum equity contribution of 10 percent. On paper, the terms are among the most affordable in Nigeria’s housing finance market.

Yet uptake has been slower than expected. Strict eligibility requirements, weak documentation among informal workers and low public trust in government programmes have limited participation. These challenges highlight the gap between policy design and on-the-ground realities.

More recently, the Nigerian Consumer Credit Corporation (CREDICORP) has emerged as a central pillar of the government’s consumer credit strategy. Established in April 2024, CREDICORP was created to democratise access to credit for working Nigerians who have long been excluded from formal lending channels. As of December 2025, the corporation has deployed more than N30 billion in credit within its first few months of operation, supporting nearly 200,000 Nigerians, according to its chief executive officer, Uzoma Nwagba.

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Nwagba said the institution has also enabled 31 financial institutions to expand their lending capacity, calling the progress evidence of what a modern public institution can achieve when built “deliberately from the ground up.” Unlike traditional lenders, CREDICORP does not lend directly. Instead, it partners with banks, microfinance institutions and fintechs by providing credit guarantees and wholesale funding. The objective is to allow Nigerians to acquire essential goods, such as vehicles, solar power systems, home improvements and digital devices, through structured credit rather than relying solely on personal savings.

Despite early momentum, CREDICORP’s experience highlights the broader challenges facing consumer credit expansion in Nigeria. Low financial literacy, high interest rates and weak credit infrastructure continue to limit impact. Borrower gullibility and poor understanding of loan terms raise the risk of debt traps, while lenders remain cautious due to unreliable credit data. Ensuring affordability, particularly for essential goods, remains a delicate balancing act.

Samson, an Economics lecturer, cautions that while consumer credit can offer short-term relief, it carries significant risks in Nigeria’s current economic climate.

“Large-scale consumer credit can help people cope but is by no means sustainable because of structural risks,” he says. High inflation, he notes, erodes the real value of borrowed funds and increases the likelihood of default. “They become debt traps,” he adds, particularly for low-income earners with unstable cash flows.

The interest rate environment compounds the problem. Nigeria’s Monetary Policy Rate currently stands at 27 percent, one of the highest globally. In practice, this means commercial lending rates can climb as high as 40 percent. “When profit margins are less than any lending rates, that means no one would borrow as it does not make sense,” Samson argues.

“In the event they embark on borrowing, they would probably be doing more harm than good to themselves.”

High interest rates, he stresses, suppress demand, discourage investment and undermine the very credit systems policymakers hope to expand. For consumer finance to thrive sustainably, many economists believe Nigeria must transition to a lower interest-rate environment, ideally with single-digit lending rates that align with household income realities.

Beyond interest rates, data remains a critical bottleneck. Effective credit systems depend on accurate identity, income and asset records. In Nigeria, fragmented databases and weak verification mechanisms have historically fuelled fraud and excluded large segments of the population from formal finance.

Here, Samson sees valuable lessons in the student loan programme. “Student loan programmes can teach consumer and housing finance lessons around data management,” he says, pointing to the integration of centralised tracking systems using Bank Verification Numbers (BVN) and National Identification Numbers (NIN). Linking repayment to the tax system, he adds, can improve compliance and build confidence, while transparency is essential to earning public trust.

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To unlock broader access to affordable credit, especially for the working class and informal sector, the Abuja-based chief economist outlines several policy priorities. Credit scoring systems, he argues, could significantly reduce risk premiums by allowing lenders to better differentiate between borrowers. Digitising land acquisition and property records would also ease access to mortgages and reduce disputes. Crucially, government guarantees for lenders serving high-risk segments, such as informal workers, could encourage banks to extend credit where they currently hesitate.

Nigeria’s growing appetite for installment payments reflects economic stress as much as innovation. Credit is filling gaps left by weak wages and limited social protection. But without deeper structural reforms, it risks masking problems rather than solving them.

As policymakers pursue inclusive growth, the challenge is not simply to expand access to credit, but to ensure it is affordable, transparent and anchored in rising incomes. Otherwise, what looks like financial inclusion today may become widespread indebtedness tomorrow.