Digitnomics 
Nigeria’s digital lending boom is making it easier to borrow money within minutes, but rising repayment difficulties, multiple borrowing and high interest rates are exposing the risks beneath the convenience.
The Federal Competition and Consumer Protection Commission (FCCPC) currently lists 505 fully approved digital money lenders, 35 conditionally approved operators and 112 apps on its watchlist.
The market has grown alongside a sharp increase in digital borrowing. Industry estimates cited by Making Finance Work for Africa indicate that Nigerian digital lending apps issued about 145 million loans worth $2.1 billion in 2023, with many of the loans valued at less than $20.
But easier access to credit has come with growing repayment pressure.
A 2024 consumer protection survey by Innovations for Poverty Action (IPA) found that 37 percent of digital-credit users surveyed had been unable to repay at least one of their loans, while 17 percent said they had reduced food expenditure to repay a loan.
Babatunde Akin-Moses, co-founder of digital lender Sycamore, said rising living costs were putting pressure on borrowers’ ability to repay.
“The cost of food, transportation, housing and other essentials has gone up, while income has not increased at the same pace for many people,” he said.
Akin-Moses also identified multiple borrowing as an increasing concern, with some customers owing several lenders at the same time.
“Once their income is not enough to service all those obligations, repayment becomes difficult,” he said.
“In many cases, the bigger issue is that their ability to pay has come under pressure.”
The Central Bank of Nigeria’s Q3 2025 Credit Conditions Survey also reported higher default rates on unsecured lending. However, the survey reflects lenders’ assessments and should not be interpreted as an official percentage of digital loans that have defaulted.
For lenders, one of the biggest challenges is getting a complete picture of a borrower’s existing obligations.
“If I know a customer has borrowed from five other lenders, for example, that should influence how much I lend and at what price,” Akin-Moses said.
Gbolabo Awelewa, a technology and risk-management expert, said technology had dramatically lowered the barriers to entering digital lending.
Cloud infrastructure, BVN and NIN verification, mobile-money rails and third-party credit-scoring services have made it possible to launch lending products far faster than traditional banks could, he said.
But that ease of entry has also intensified competition.
“When your model depends on volume and speed, and the app next to yours approves in ninety seconds, there’s pressure to relax your risk criteria rather than lose the customer,” Awelewa said.
The result is a market where speed of disbursement is increasingly being tested against the quality of underwriting.
The cost of credit is another concern.
Current lender disclosures show significant variations in pricing. FairMoney gives a representative example of a ₦100,000 three-month loan attracting ₦30,000 in interest, resulting in total repayment of ₦130,000 and a representative annual percentage rate (APR) of 120 percent.
Branch publishes APRs ranging from 34 percent to 271 percent, while Carbon states that its monthly rates range from 4.5 percent to 30 percent, with a maximum APR of 195 percent.
These are lenders’ published ranges and representative examples, and actual pricing varies according to factors including loan size, tenor and borrower risk.
Still, the figures show how expensive some forms of instant digital credit can become.
Akin-Moses said the interest rate alone does not determine whether a loan is economically worthwhile.
“If a business borrows ₦1 million for one month to execute a transaction where it expects to make a 20% margin, paying 4% for the loan is not necessarily expensive,” he said.
The problem, he said, begins when the cost of credit exceeds the economic value generated by the borrowed money or when a borrower takes another loan simply to repay an earlier one.
“At that point, the credit is no longer helping the borrower manage a temporary cash-flow need. It is creating a debt cycle,” he said.
Awelewa said default risk, fraud, loan stacking, customer acquisition and collections all contribute to the cost of digital credit.
Technology can reduce some of those costs through alternative-data credit scoring, AI-based fraud detection and greater use of credit-bureau information.
“But I wouldn’t oversell it,” he said. “Technology narrows the uncertainty, it doesn’t remove the basic tension between disbursing fast and underwriting properly.”
Roosevelt Elias, a fintech entrepreneur, questioned whether the proliferation of lenders necessarily means Nigerians have gained access to affordable credit.
“The demand is real and it is enormous,” Elias said. “But a queue of over four hundred approved lenders … is not the same thing as access to affordable credit.”
He argued that Nigeria’s problem was not simply a shortage of lenders but a shortage of cheap, productive credit.
“Nigerians need financial education even more than they need loans,” Elias said, calling for stronger credit infrastructure, consumer protection and a national credit system linked to borrowers’ NIN and BVN.
The regulatory pressure is consequently widening.
The FCCPC’s Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations 2025 require greater transparency from digital lenders and empower the Commission to monitor consumer-lending interest rates to ensure they are not exploitative. The rules also provide sanctions for non-compliance, including fines, suspension and revocation of approval.
The risks are not limited to debt.
The Nigeria Data Protection Commission has previously reported more than 400 privacy-breach cases involving digital lenders, raising concerns about how lending apps collect and use borrowers’ personal information.
Awelewa warned that some lenders collect data beyond what may be necessary to assess creditworthiness, creating additional cybersecurity risks.
“Any lender sitting on that much personal data is a target,” he said.
The underlying problem is therefore becoming clearer.
Digital lending has solved part of Nigeria’s credit-access problem by making small loans available to consumers and businesses that may struggle to obtain conventional bank credit.
But the speed of disbursement has developed faster than the systems needed to make that credit safe and sustainable.
“Fast credit is a good thing for a country like ours where a lot of people are locked out of traditional banking,” Awelewa said. “The problem isn’t the speed. It’s that disbursement capability has scaled faster than the infrastructure, bureau reporting, data governance, verification, that would make that speed safe.”
With 37 percent of surveyed digital-credit users reporting difficulty repaying at least one loan, hundreds of lenders competing for borrowers and some digital-credit products carrying triple-digit APRs, Nigeria’s digital lending industry is facing a critical test.
The question is no longer whether Nigerians can get a loan in minutes.
It is whether they can afford the debt that comes with it.
