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Nigeria has made progress in bringing extra folks into the formal financial system, however having a checking account doesn’t essentially imply having the ability to receive a mortgage. While extra Nigerians can now access financial companies, borrowing prices, restricted credit histories, and irregular incomes nonetheless form who can receive formal credit and on what phrases.
According to the 2026 Access to Financial Services in Nigeria (A2F) survey by Enhancing Financial Innovation & Access (EFInA), formal financial inclusion rose to 73%, up from 64% in 2023. The proportion of adults excluded from the financial system fell from 26% to 21%. EFInA estimates that 87.2 million Nigerian adults are actually formally included, but solely about 12 million (10%) access formal credit.
These figures present that financial inclusion isn’t the identical as access to credit. Financial inclusion encompasses access to and use of companies equivalent to funds, financial savings, insurance coverage and borrowing. An individual might have a checking account, obtain funds digitally and save by means of a proper establishment with out qualifying for a mortgage.
For lenders, they have to decide whether or not a borrower earns sufficient to repay, whether or not that earnings could be verified, what different financial obligations the borrower has, and how doubtless they’re to meet the compensation schedule. As a outcome, folks can take part in the formal financial system and nonetheless battle to receive inexpensive credit.
According to the Central Bank of Nigeria (CBN), excellent client credit fell from ₦4.72 trillion ($3.5 billion) in 2024 to ₦3.78 trillion ($2.8 billion) in 2025, a decline of 19.92%. For debtors who battle to receive inexpensive loans from formal lenders, casual sources are providing an alternate, usually with fewer procedural boundaries. Stears estimates that potential demand for credit amongst casual debtors transitioning to formal lending is value $621 million.
The downside for debtors
For debtors, the issue is not only access to credit, however its price. EFInA discovered that 16% of adults borrow by means of casual sources, and 10% from household and pals.
“Alternative finance often wins on lower friction—speed, simplicity, proximity and flexibility,” EFiNA stated.
In 2025, Nigeria’s financial coverage charge stood between 27% and 27.5%. The coverage charge isn’t the rate of interest shoppers pay, but it surely displays the broader financial setting in which lenders function. When funding is pricey, lenders face strain to cost extra to cowl their prices and the danger of non-repayment. Those larger charges, in flip, could make loans more durable for debtors to service.
For illustration, a ₦100 ($0.075) mortgage charged at a easy annual rate of interest of 27% would accrue ₦27 ($0.02) in curiosity over one 12 months, bringing compensation to ₦127 ($0.095) earlier than charges.
Without decrease rates of interest, inexpensive client credit can be tough to scale. But charge cuts alone is not going to clear up the issue. Inflation should additionally ease sustainably. High inflation erodes debtors’ buying energy and leaves much less earnings obtainable for repayments, whereas making it more durable for lenders to supply cheaper loans with out taking up extra threat. As inflation eases, the CBN can have extra room to scale back its coverage charge, doubtlessly decreasing funding prices and abating strain on lending charges.
The problem is to deliver down each the price of credit and the financial strain on debtors. Until inflation and rates of interest ease, lenders will face strain to cost extra for threat, whereas the individuals who want credit most will proceed to battle with its price, and formal credit access will proceed to be a dream.
The downside for lenders
Digital lenders have expanded access to borrowing by means of cell functions, automated lending choices, and various knowledge about potential prospects. Where banks have retreated, digital lenders have crammed the gap.
Commercial banks’ loan-to-deposit ratio stood at 48.07% in 2025, beneath the reported 80% benchmark.
Digital lenders use transaction histories and compensation information to consider individuals who have restricted standard credit histories. But sooner lending choices don’t eradicate the underlying financial threat.
A lender that approves a mortgage should nonetheless fund the cash, service the account, and acquire compensation. If the borrower defaults, the lender might get better solely a part of the principal and curiosity it anticipated to obtain.
This creates a fundamental financial constraint: lending income should cowl anticipated credit losses and all different related prices earlier than a lender could make a sustainable revenue.
The CBN reported a non-performing mortgage ratio of 8.03% in January 2026, which means roughly ₦8 ($0.006) of each ₦100 ($0.075) in financial institution loans was categorised as non-performing loans (NPLs), which debtors have failed to make scheduled repayments, usually for 90 days or extra.
Fintech big OPay’s reported lending figures supply a extra direct illustration of the financial pressures that credit suppliers should handle.
The firm reported $938.3 million in mortgage originations, $260.25 million in loan-financing income, and $121.29 million in provisions for anticipated credit losses in 2025.
Loan-financing income was about 27.7% of originations. Expected credit-loss provisions amounted to about 46.6% of loan-financing income.
While these figures don’t set up OPay’s revenue per mortgage, they illustrate why lenders plan a considerable portion of their lending income on the anticipated price of loans that won’t be totally repaid.
An evaluation of 300,000 active borrowers by digital lender, Credit Direct, places the typical mortgage quantity at roughly ₦430,962 ($323.18) for males and ₦478,117 ($358.55) for girls. At a hypothetical easy annual rate of interest of 28%, these loans would generate ₦120,669 ($90.49) and ₦133,873 ($100.39) in curiosity, respectively, over one 12 months, earlier than charges. However, this income wouldn’t signify revenue. Lenders should nonetheless cowl funding prices, working bills, and losses from loans that aren’t totally repaid.
For debtors, the problem is whether or not they can afford to tackle and repay such debt. EFInA discovered that 59% of respondents would battle to increase ₦156,000 ($116.99) inside seven days, suggesting that many Nigerians have restricted financial buffers to take in surprising bills or repay loans when due.
What will unlock the market?
In Brazil, account possession stood at 86.4%, while 45.9% of adults reported formal borrowing. China recorded account possession of 89.4% and formal borrowing of 40.7%. Kenya recorded 90.1% of adults with a financial account, and solely 12.6% reported formal borrowing. South Africa equally recorded account possession of 81.1%, in contrast with a proper borrowing charge of 12.4%.
In these nations, financial inclusion and borrowing are trending upward, pushed by bettering lending situations, credit info, family incomes, and the supply of appropriate mortgage merchandise.
For Nigeria, the problem isn’t merely to improve the quantity of credit obtainable. It is to make extra lending each repayable for debtors and financially sustainable for lenders.
Lower inflation and funding prices might assist ease strain on mortgage pricing. Better credit info might assist lenders distinguish between debtors with completely different compensation capacities. Loan sizes and compensation schedules that mirror debtors’ money flows might additionally scale back the danger of repayments overwhelming family budgets.
As Nigeria’s financial inclusion continues to develop, the standard of inclusion is turning into an more and more essential concern. Without access to credit, formal financial inclusion might not translate into significant alternatives for people to handle financial shocks, make investments in their livelihoods, or meet main bills.
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