mORGANABLE Economy Watch
The CBN noted that the expansion in credit was driven largely by increases in both personal and retail loans, which rose by 1.98 per cent and 0.90 per cent, respectively
KaNo—
Personal borrowing by Nigerians rose to an estimated N2.06tn in May 2026, highlighting growing reliance on credit as households grapple with rising living costs and weak economic conditions, data from the Central Bank of Nigeria has shown.
Figures obtained from the apex bank’s May 2026 Economic Report indicate that total consumer credit outstanding increased to N3.18tn during the month, up from N3.13tn recorded in April.
This represents a month-on-month growth of 1.60 per cent, translating to an additional N50bn in borrowing within a single month.
A breakdown of the data revealed that personal loans remained the dominant component of consumer credit, accounting for 64.78 per cent of the total.
This places the value of personal borrowing at approximately N2.06tn at the end of May. Retail loans, which are typically tied to the purchase of goods and services, made up the remaining 35.22 per cent, amounting to about N1.12tn.
The CBN noted that the expansion in credit was driven largely by increases in both personal and retail loans, which rose by 1.98 per cent and 0.90 per cent, respectively.
The stronger growth in personal loans suggests that individuals are increasingly turning to unsecured or general-purpose credit facilities to meet financial needs.
“Consumer credit outstanding increased by 1.60 per cent to N3.18tn from N3.13tn in the preceding month, driven by growth in personal and retail loans,” the report stated.
Further analysis shows that personal loans alone increased by roughly N40bn within the review period, reinforcing their position as the key driver of Nigeria’s consumer credit market.
The trend underscores the extent to which households depend on borrowing to cushion economic pressures.
The rise in borrowing comes amid a challenging macroeconomic environment marked by weak consumer demand, high operating costs, and persistent inflationary pressures.
According to the CBN, economic activity remained subdued in May, with the composite Purchasing Managers’ Index standing at 49.60 points, slightly above the 49.40 points recorded in April but still below the 50-point benchmark that separates expansion from contraction.
The bank attributed the continued contraction to declining new orders, subdued demand, and elevated production costs. It also highlighted weak consumer spending and rising energy-related expenses as key constraints affecting both the industrial and services sectors.
Inflationary trends further compounded the financial strain on households. Headline inflation rose to 15.93 per cent in May from 15.69 per cent in April, driven largely by persistent cost pressures and higher energy prices.
Although month-on-month inflation moderated to 1.75 per cent from 2.13 per cent, the overall price level remained elevated.
Analysts say the combination of rising borrowing and weak spending reflects a coping mechanism among households facing shrinking purchasing power.
Rather than borrowing to invest or expand economic activity, many Nigerians are increasingly taking loans to meet basic consumption needs.
This trend is corroborated by findings from the latest Access to Financial Services in Nigeria Survey, which revealed a shift in the purpose of borrowing among formal credit users.
According to the report, 40.8 per cent of borrowers now take loans primarily for consumption and coping purposes, a significant increase from 31.7 per cent recorded in 2023.
The shift represents a 9.1 percentage-point rise and makes consumption-related borrowing the largest use of credit, overtaking loans for productive activities.
In contrast, borrowing for business or enterprise purposes declined from 40.2 per cent to 34.3 per cent within the same period, while loans for household asset acquisition fell from 25.2 per cent to 23.4 per cent.
The report warned that the growing emphasis on consumption-driven borrowing could have long-term implications for economic growth and financial stability.
“Coping and consumption purposes rose from 31.7 per cent to 40.8 per cent, while productive purposes 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.
Despite the concerns, access to credit has expanded significantly in recent years.
The survey showed that formal credit usage increased from six per cent of the adult population in 2023 to 10 per cent in 2026, translating to about 11.9 million Nigerians borrowing from regulated financial institutions.
When informal sources such as cooperatives, family lending, and informal lenders are included, about 36 per cent of adults have access to some form of credit.
The data also highlighted notable increases in borrowing across different demographic groups.
Credit usage among informally employed individuals tripled from five per cent in 2023 to 15 per cent in 2026, reflecting growing financial pressure in the informal sector.
Similarly, borrowing among young people aged 18 to 35 rose from four per cent to 10 per cent, while business owners recorded an increase from four per cent to 10 per cent. Among farmers, credit access rose from two per cent to six per cent.
However, the expansion in credit has been accompanied by rising financial distress among borrowers.
The survey found that 45.8 per cent of formal credit users reported experiencing some or severe repayment difficulties, while a staggering 83.8 per cent indicated ongoing financial stress.
Experts have warned that the growing debt burden, particularly for consumption purposes, could exacerbate household vulnerability if economic conditions do not improve.
Meanwhile, data from the National Bureau of Statistics showed that government efforts to generate revenue from individuals and informal businesses have also intensified.
Nigeria’s 36 states and the Federal Capital Territory collected N112.65bn in direct assessment taxes in 2025, representing a 29.4 per cent increase from the N87.05bn recorded in 2024.
The additional N25.59bn generated within one year reflects improved tax enforcement and expanding coverage of self-employed individuals and informal sector operators.
Lagos State accounted for nearly two-thirds of the total collection, underscoring regional disparities in revenue generation capacity.
Direct assessment is a form of personal income tax applied mainly to individuals whose earnings are not captured under the Pay-As-You-Earn system.
It typically targets self-employed persons and operators in the informal economy, with tax liabilities determined based on the scale of their economic activities.
The NBS explained that the system allows taxpayers to assess their own income and remit the appropriate tax, while also enabling state authorities to impose levies on informal businesses.
The rise in tax collections, coupled with increased borrowing, paints a complex picture of Nigeria’s economic landscape, where households and small businesses are under mounting pressure from both rising costs and expanding financial obligations.
As inflation persists and economic growth remains fragile, stakeholders say policy measures aimed at boosting incomes, supporting productive lending, and easing cost pressures will be critical to reducing reliance on credit for survival.
