Nigeria’s consumer credit market contracted for the first time in six years, dropping 19.89% to N3.78 trillion in 2025, data from the Central Bank of Nigeria revealed.
This decline marked the first since December 2019. The bank’s annual report showed personal loans fell sharply, while retail lending expanded. Total consumer credit outstanding decreased from N4.72 trillion the previous year.
Interest rates reshape lending patterns
The Central Bank attributed the contraction to higher borrowing costs in a changing interest rate environment. Personal loans, previously the largest segment, dropped to N1.85 trillion. Meanwhile, retail loans jumped 63.77% to N1.94 trillion.
Retail loans now represent 51.16% of all consumer credit. Personal loans account for the rest. The change reflects banks favoring shorter-term, lower-risk lending during economic uncertainty.
Consumer credit’s portion of total private-sector lending also shrank, falling to 6.60% from 7.98%. The bank noted that while short-term credit still led bank portfolios, its share declined by 7.71 percentage points to 51.60%.
Long-term lending gains ground
Long-term credit increased, rising 7.82 percentage points to 34.94% of total lending. Medium-term credit barely changed, dipping just 0.11 percentage points to 13.46%.
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The Central Bank connected this shift to how banks now structure deposits. Short-term deposits, those maturing in a year or less, still dominate at 91.00%, up from 90.09%. Medium-term deposits grew to 5.15%, while long-term deposits fell to 3.85%.
Banks have traditionally preferred short-term lending to align with deposit liabilities. The report indicates a slow move toward longer maturities, possibly reflecting cautious optimism about economic conditions. High interest rates, however, continue to burden borrowers.
Despite the drop in consumer credit, overall lending to Nigeria’s private sector reached N83.26 trillion in June 2026. This figure represents a 9% increase from the same period the previous year. The Central Bank maintained its benchmark interest rate at 26.5%, a level needed to control inflation but one that also limits credit access.
The report did not clarify whether the decline in consumer credit stemmed from weaker demand or stricter lending rules. The growth in retail loans, often secured by salaries or assets, suggests banks are targeting less risky borrowers.
Should borrowing costs remain high, these changes could continue altering how credit operates in Nigeria. The current figures indicate a market adjusting to a more expensive financial climate.