ISSUES IN BORROWING FOR CONSUMPTION

In a troubling development, the recently released 2026 Access to Financial Services in Nigeria (A2F) Survey has revealed a significant shift in the country's credit ecosystem. Conducted by Enhancing Financial Innovation & Access (EFInA) and the National Bureau of Statistics (NBS), the survey examined borrowing behavior between 2023 and 2026 across 18,679 adults in Nigeria's 36 states and the Federal Capital Territory (FCT).

The findings indicate a rise in consumption borrowing, which has coincided with a decrease in credit allocated to farming, starting a business, or capital expenditure.

The survey uncovered a distressing trend, with 45.8% of formal credit users reporting some or serious repayment stress, while 83.8% experienced ongoing financial stress. The increase in the percentage of people borrowing for personal needs, as opposed to business needs, is cause for concern. However, this already high base in 2023 suggests an underlying, worsening challenge.

When people borrow to pay for rent, school fees, and medical bills, it reflects low savings, limited disposable income, and insufficient insurance coverage. Central Bank of Nigeria Governor, Mr. Olayemi Cardoso, recently highlighted inflation as a major obstacle to financial inclusion, as it erodes purchasing power and increases borrowing costs.

The survey data shows that 41% of formal borrowers now use loans for coping and consumption purposes, a substantial rise from 31.7% in 2023. This shift has made coping and consumption the largest purpose of formal credit, surpassing productive enterprise borrowing, which fell from 40.2% to 34.3% during the same period.

The survey underscores how mounting macroeconomic pressures and rising living costs are forcing consumers to use credit to meet daily household necessities rather than for economic expansion. The Direct Nigeria Consumer Credit Insight 2025 report echoes these findings, revealing that most Nigerians borrow for basic living essentials, such as rent, emergency medical bills, and school fees, particularly among formally employed adults earning less than N200,000 monthly.

While President Bola Tinubu's government implemented economic reforms since May 2023, stabilizing macroeconomic fundamentals, the consequences have been severe for ordinary Nigerians. The side effects of the reforms have increased vulnerability, especially for the poorest who lack collateral for formal loans and may be forced into the hands of loan sharks.

The erosion of purchasing power has pushed millions into the poverty trap, as revealed by a recent Agora Policy report, which noted that the removal of petrol subsidies significantly worsened poverty levels, raising the national poverty headcount to 63%.

The A2F Survey serves as a crucial wake-up call for the government at all levels. Consumption borrowing does not generate economic multipliers and consumes scarce financial resources needed to stimulate growth. Nigeria currently faces an existential affordability crisis for essentials, and most people are desperately trying to survive while awaiting the promised prosperity.

However, analysts argue that Nigeria must move beyond simply counting the number of people with access to financial services and evaluate whether such access improves well-being by building productive capacity. An economy cannot be considered recovering when people borrow solely to survive.