Nigeria’s financial inclusion is growing, but access to credit still lags

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Nigeria has made progress in bringing more people into the formal financial system, but having a bank account does not necessarily mean being able to obtain a loan. While more Nigerians can now access financial services, borrowing costs, limited credit histories, and irregular incomes still shape who can obtain formal credit and on what terms.

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 now formally included, yet only about 12 million (10%) access formal credit.

These figures show that financial inclusion is not the same as access to credit. Financial inclusion encompasses access to and use of services such as payments, savings, insurance and borrowing. A person may have a bank account, receive payments digitally and save through a formal institution without qualifying for a loan.

For lenders, they must determine whether a borrower earns enough to repay, whether that income can be verified, what other financial obligations the borrower has, and how likely they are to meet the repayment schedule. As a result, people can participate in the formal financial system and still struggle to obtain affordable credit.

According to the Central Bank of Nigeria (CBN), outstanding consumer 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 borrowers who struggle to obtain affordable loans from formal lenders, informal sources are offering an alternative, often with fewer procedural barriers. Stears estimates that potential demand for credit among informal borrowers transitioning to formal lending is worth $621 million.

The problem for borrowers

For borrowers, the problem is not just access to credit, but its cost. EFInA found that 16% of adults borrow through informal sources, and 10% from family and friends.

“Alternative finance often wins on lower friction—speed, simplicity, proximity and flexibility,” EFiNA said.

In 2025, Nigeria’s monetary policy rate stood between 27% and 27.5%. The policy rate is not the interest rate consumers pay, but it reflects the wider monetary environment in which lenders operate. When funding is expensive, lenders face pressure to charge more to cover their costs and the risk of non-repayment. Those higher rates, in turn, can make loans harder for borrowers to service.

For illustration, a ₦100 ($0.075) loan charged at a simple annual interest rate of 27% would accrue ₦27 ($0.02) in interest over one year, bringing repayment to ₦127 ($0.095) before fees.

Without lower interest rates, affordable consumer credit will be difficult to scale. But rate cuts alone will not solve the problem. Inflation must also ease sustainably. High inflation erodes borrowers’ purchasing power and leaves less income available for repayments, while making it harder for lenders to offer cheaper loans without taking on more risk. As inflation eases, the CBN can have more room to reduce its policy rate, potentially lowering funding costs and abating pressure on lending rates.

High inflation has eroded household purchasing power, leaving many Nigerians with less disposable income to repay loans and making affordable credit harder to access. Image Source: Victor Adewale/Bloomberg.

The challenge is to bring down both the cost of credit and the financial pressure on borrowers. Until inflation and interest rates ease, lenders will face pressure to charge more for risk, while the people who need credit most will continue to struggle with its cost, and formal credit access will continue to be a dream.

The problem for lenders

Digital lenders have expanded access to borrowing through mobile applications, automated lending decisions, and alternative data about potential customers. Where banks have retreated, digital lenders have filled the gap.

Commercial banks’ loan-to-deposit ratio stood at 48.07% in 2025, below the reported 80% benchmark.

Digital lenders use transaction histories and repayment records to evaluate people who have limited conventional credit histories. But faster lending decisions do not eliminate the underlying financial risk.

A lender that approves a loan must still fund the money, service the account, and collect repayment. If the borrower defaults, the lender may recover only part of the principal and interest it expected to receive.

This creates a basic economic constraint: lending revenue must cover expected credit losses and all other relevant costs before a lender can make a sustainable profit.

The CBN reported a non-performing loan ratio of 8.03% in January 2026, meaning roughly ₦8 ($0.006) of every ₦100 ($0.075) in bank loans was classified as non-performing loans (NPLs), which borrowers have failed to make scheduled repayments, typically for 90 days or more.

Fintech giant OPay’s reported lending figures offer a more direct illustration of the financial pressures that credit providers must manage.

The company reported $938.3 million in loan originations, $260.25 million in loan-financing revenue, and $121.29 million in provisions for expected credit losses in 2025.

Loan-financing revenue was about 27.7% of originations. Expected credit-loss provisions amounted to about 46.6% of loan-financing revenue.

While these figures do not establish OPay’s profit per loan, they illustrate why lenders plan a substantial portion of their lending revenue on the anticipated cost of loans that will not be fully repaid.

An analysis of 300,000 active borrowers by digital lender, Credit Direct, puts the average loan amount at approximately ₦430,962 ($323.18) for men and ₦478,117 ($358.55) for women. At a hypothetical simple annual interest rate of 28%, these loans would generate ₦120,669 ($90.49) and ₦133,873 ($100.39) in interest, respectively, over one year, before fees. However, this revenue would not represent profit. Lenders must still cover funding costs, operating expenses, and losses from loans that are not fully repaid.

For borrowers, the challenge is whether they can afford to take on and repay such debt. EFInA found that 59% of respondents would struggle to raise ₦156,000 ($116.99) within seven days, suggesting that many Nigerians have limited financial buffers to absorb unexpected expenses or repay loans when due.

What will unlock the market?

In Brazil, account ownership stood at 86.4%, while 45.9% of adults reported formal borrowing. China recorded account ownership of 89.4% and formal borrowing of 40.7%. Kenya recorded 90.1% of adults with a financial account, and only 12.6% reported formal borrowing. South Africa similarly recorded account ownership of 81.1%, compared with a formal borrowing rate of 12.4%.

In these countries, financial inclusion and borrowing are trending upward, driven by improving lending conditions, credit information, household incomes, and the availability of suitable loan products.

For Nigeria, the challenge is not simply to increase the amount of credit available. It is to make more lending both repayable for borrowers and financially sustainable for lenders.

Lower inflation and funding costs could help ease pressure on loan pricing. Better credit information could help lenders distinguish between borrowers with different repayment capacities. Loan sizes and repayment schedules that reflect borrowers’ cash flows could also reduce the risk of repayments overwhelming household budgets.

As Nigeria’s financial inclusion continues to grow, the quality of inclusion is becoming an increasingly important concern. Without access to credit, formal financial inclusion may not translate into meaningful opportunities for individuals to manage financial shocks, invest in their livelihoods, or meet major expenses.

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