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Nigeria has made progress in bringing extra individuals into the formal financial system, but having a checking account doesn’t essentially imply having the ability to get hold of a mortgage. While extra Nigerians can now access financial companies, borrowing prices, restricted credit histories, and irregular incomes still form who can get hold of 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 is not the identical as access to credit. Financial inclusion encompasses access to and use of companies comparable to funds, financial savings, insurance coverage and borrowing. An individual might have a checking account, obtain funds digitally and save via 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 revenue might be verified, what different financial obligations the borrower has, and the way probably they’re to meet the compensation schedule. As a consequence, individuals can take part within the formal financial system and still battle to get hold of reasonably priced 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 get hold of reasonably priced loans from formal lenders, casual sources are providing another, typically with fewer procedural limitations. 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 simply access to credit, but its price. EFInA discovered that 16% of adults borrow via casual sources, and 10% from household and mates.
“Alternative finance often wins on lower friction—speed, simplicity, proximity and flexibility,” EFiNA mentioned.
In 2025, Nigeria’s financial coverage price stood between 27% and 27.5%. The coverage price is not the rate of interest shoppers pay, but it displays the broader financial surroundings by which lenders function. When funding is costly, lenders face stress to cost extra to cowl their prices and the chance of non-repayment. Those increased charges, in flip, could make loans tougher 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 yr, bringing compensation to ₦127 ($0.095) earlier than charges.
Without decrease rates of interest, reasonably priced client credit might be tough to scale. But price 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 revenue out there for repayments, whereas making it tougher for lenders to provide cheaper loans with out taking up extra danger. As inflation eases, the CBN can have extra room to cut back its coverage price, probably decreasing funding prices and abating stress on lending charges.
The problem is to deliver down each the price of credit and the financial stress on debtors. Until inflation and rates of interest ease, lenders will face stress to cost extra for danger, 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 via cellular functions, automated lending selections, and various information about potential clients. Where banks have retreated, digital lenders have stuffed the hole.
Commercial banks’ loan-to-deposit ratio stood at 48.07% in 2025, beneath the reported 80% benchmark.
Digital lenders use transaction histories and compensation data to consider individuals who have restricted standard credit histories. But quicker lending selections don’t eradicate the underlying financial danger.
A lender that approves a mortgage should still fund the cash, service the account, and accumulate compensation. If the borrower defaults, the lender might recuperate 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 categorized 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 provide 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 absolutely repaid.
An evaluation of 300,000 lively debtors by digital lender, Credit Direct, places the typical mortgage quantity at roughly ₦430,962 ($323.18) for males and ₦478,117 ($358.55) for ladies. 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 yr, earlier than charges. However, this income wouldn’t signify revenue. Lenders should still cowl funding prices, working bills, and losses from loans that aren’t absolutely 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 elevate ₦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%, whereas 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 price of 12.4%.
In these international locations, financial inclusion and borrowing are trending upward, pushed by enhancing lending situations, credit data, family incomes, and the provision of appropriate mortgage merchandise.
For Nigeria, the problem is not merely to enhance the quantity of credit out there. It is to make extra lending each repayable for debtors and financially sustainable for lenders.
Lower inflation and funding prices might assist ease stress on mortgage pricing. Better credit data might assist lenders distinguish between debtors with completely different compensation capacities. Loan sizes and compensation schedules that mirror debtors’ money flows might additionally cut back the chance of repayments overwhelming family budgets.
As Nigeria’s financial inclusion continues to develop, the standard of inclusion is changing 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, put money into their livelihoods, or meet main bills.
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