Banks disburse N470bn personal loans – CBN

The Central Bank of Nigeria has disclosed that Nigerians secured personal loans amounting to N470bn from banks in the last three months of 2024.

The apex bank revealed this in its Fourth Quarter 2024 Economic Report released on Sunday.

The report indicated that consumer credit outstanding rose by 11.06 per cent to N4.72tn at the end of December 2024, up from N4.25tn recorded at the end of September 2024.

This significant increase reflects a growing reliance on personal loans amid prevailing economic conditions.

According to the report, personal loans increased by 21.27 per cent to N3.82tn compared to the N3.15tn recorded at the end of the preceding quarter.

This surge in personal loans accounted for the bulk of the consumer credit growth within the period.

However, while personal loans saw a significant increase, retail loans fell by 18.18 per cent to N0.90tn from N1.10tn at the end of September 2024.

This decline highlights a shift in borrowing patterns, with more individuals opting for personal loans instead of retail credit.

The CBN report also revealed that personal loans constituted the dominant share of the consumer credit portfolio, accounting for 80.98 per cent, while retail loans made up the remaining balance.

This suggests that personal loans have remained the preferred form of consumer credit among Nigerians, as individuals increasingly turn to bank loans to meet their financial needs.

The report stated, “Consumer credit outstanding rose by 11.06 per cent to N4.72 trillion at end-December 2024, from N4.25 trillion at end-September 2024. Personal loans increased by 21.27 per cent to N3.82 trillion compared with the level at end-September 2024.

“Retail loan, however, declined by 18.18 per cent to N0.90 trillion from N1.10 trillion at end-September 2024. A breakdown indicated that personal loans, with a share of 80.98 per cent, remained dominant, while retail loans accounted for the balance.”

The rise in personal loans is likely due to factors such as increasing living costs, economic uncertainties, and greater access to credit facilities by commercial banks.

The sustained demand for personal loans could also be linked to consumers’ efforts to meet financial obligations amid inflationary pressures and higher costs of living.

However, the surge in personal loans occurred amid rising inflation in Nigeria, with the headline inflation rate reaching 34.80 per cent in December 2024, up from 34.60 per cent in November.

This increase was primarily driven by heightened demand during the festive season, particularly for food and non-alcoholic beverages.

To curb persistent inflationary pressures, the CBN’s Monetary Policy Committee implemented several rate hikes throughout 2024, raising the Monetary Policy Rate by a total of 875 basis points to 27.50 per cent.

Consequently, commercial banks adjusted their lending rates to reflect the higher MPR, making personal loans more expensive for individuals.

While personal loans may offer short-term financial relief, the higher interest rates could lead to increased repayment burdens for borrowers.

There are concerns that as personal loans become more costly, there could be a rise in loan defaults, especially among low-income earners and individuals with unstable income sources.

However, the CBN report noted that banks’ asset quality improved as the non-performing loans ratio fell to 4.50 per cent in December 2024 from 4.58 per cent in September, staying below the 5.00 per cent prudential benchmark, indicating better loan recoveries.