The number of companies approved to operate in Nigeria’s digital lending space has risen to 436 as of July 2025, a 40.2 percent increase from the 311 recorded in September 2024.
These lenders include firms granted operational licenses by the Central Bank of Nigeria (CBN) and others approved by the Federal Competition and Consumer Protection Commission (FCCPC) to operate mobile lending apps.
However, amid this lending boom, the International Monetary Fund (IMF) has warned that rising defaults in the sector, along with other sectors, could threaten the country’s financial stability.
“High NPLs in several NBFIs, new mortgage and consumer lending schemes and fast-growing Fintech and crypto sectors pose potential risks to financial stability,” the IMF said in its recent Article IV report on Nigeria, while noting that the country’s financial system remains resilient but has pockets of vulnerabilities.
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Babatunde Akin-Moses, co-founder of Sycamore, a licensed digital lender, confirmed that loan defaults are on the rise in a recent conversation with BusinessDay. “There has been an increase in loan defaults industry-wide. We can see this based on the recorded number of bad loan applicants that have (as captured by credit bureaus) when they come to our platform,” he said.
So far, 375 digital lenders have secured full approval, 40 have conditional approvals, and 21 hold CBN operational licenses. The surge comes amid soaring demand for credit, especially among individuals and small businesses squeezed by rising living costs.
Recent CBN data show that while personal loans dropped by 37.4 percent, from N3.82 trillion to N2.39 trillion, in January 2025, retail loans shot up by 92.2 percent, climbing from N0.90 trillion to N1.73 trillion.
This indicates increased borrowing from small businesses dealing with inflation and higher operating costs. There are close to 40 million micro, small and medium-sized enterprises (MSMEs) in the country, and they contribute about 45 percent to the gross domestic product (GDP). Most are micro businesses, many of which are now turning to short-term loans to stay afloat. According to the National Bureau of Statistics (NBS), the average small business earns around N223,250 in monthly revenue.
“Rising cost directly impacts the need to access more funds,” said Adeshina Adewumi, chief executive officer/ founder of Trade Lenda.
Bello Rukayat, co-founder of Regxta, which serves businesses in rural and semi-urban areas, said: “Our customers are asking for an increment in the value of the loan amount. The cost of things is skyrocketing. People are asking for more, even though they are still owing.”
Rukayat noted that while businesses are asking for more loans, they are also struggling to repay. Due to this, digital lenders are faced with high non-performing loans.
“Loan defaults are now a significant issue,” Babatunde Irukera, former FCCPC head, warned shortly before leaving office.
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“Many people take a certain amount and don’t repay,” said Gbemi Adelekan, president of the Money Lenders Association, the umbrella body of registered digital money lenders.
While the FCCPC intends to fight these defaults with new regulations, lenders are tightening onboarding processes. Many now rely on credit history, phone data, and deeper background checks before disbursing funds.
“Loan apps are very careful now in terms of onboarding customers because the default rates are increasing by the day due to the economic situation in the country,” Adelekan said. “We now analyse to ensure they are capable and willing to pay based on all the available data. Some lenders are using data on phones to analyse customers. This is because people are borrowing without the intention to repay.”
While this is not foolproof with some borrowers taking advantage of the fact that credit history reports are not real-time, it has stemmed the tide, but more needs to be done.
“The regular monthly stress tests and strengthening regulations, and supervision are important,” the IMF said. “Addressing structural impediments to private credit extension would support growth.”
