Tight monetary policy and high interest rates push households to reduce borrowing, driving a sharp fall in personal loan balances…..
Nigerians repaid approximately N1.33 trillion in personal loans within a year, as household borrowing declined significantly between November 2024 and November 2025, according to new data released by the Central Bank of Nigeria.
Figures contained in the apex bank’s Economic Report for November 2025 show that outstanding personal loan balances dropped from N3.32 trillion in November 2024 to N1.99 trillion in November 2025, reflecting a substantial reduction in consumer borrowing during the period.
The sharp fall in personal lending also contributed to a broader contraction in consumer credit across Nigeria’s banking sector.
Consumer credit weakens
Further analysis of the report indicates that total consumer credit outstanding declined from N4.42 trillion in November 2024 to N3.19 trillion in November 2025, highlighting weaker borrowing conditions among households.
According to the CBN, the drop was driven by reduced activity in both personal and retail lending segments.
“Consumer credit outstanding declined by 13.32 per cent to N3.19 trillion, from N3.68 trillion in the preceding month. The decrease was owing to contraction in both retail and personal lending,” the report stated.
Despite the decline, personal loans remained the largest component of consumer credit within the Nigerian financial system.
The central bank noted that personal loans accounted for 62.38 percent of total consumer credit, valued at N1.99 trillion, while retail loans represented 37.62 percent, amounting to N1.20 trillion.
Retail loans show modest growth
While personal loan balances recorded a steep decline, retail lending posted moderate growth during the same period.
Retail loans rose from N1.11 trillion in November 2024 to N1.20 trillion in November 2025, representing a year-on-year increase of about N90 billion.
However, the rise in retail credit was not sufficient to offset the sharp drop in personal borrowing, leaving overall consumer credit lower during the review period.
The data reflects shifting credit behaviour among Nigerian households as borrowers adjust to tougher financial conditions and higher borrowing costs.
Impact of tight monetary policy
Throughout much of 2025, the Central Bank of Nigeria maintained a tight monetary policy stance aimed at curbing inflation.
The bank’s Monetary Policy Committee (MPC) held the Monetary Policy Rate (MPR) at 27.5 percent for most of 2025, before implementing a 50-basis-point reduction to 27 percent in September 2025 — the first rate cut since 2020.
The committee maintained the 27 percent rate during its November 2025 meeting, reflecting continued caution despite signs of easing inflation.
Higher interest rates typically discourage fresh borrowing while encouraging borrowers to repay existing loans, particularly among households and small businesses.
Shift in borrowing patterns
The CBN data also suggests a gradual shift in the structure of consumer borrowing.
Although personal loans continue to dominate the credit landscape, their share has declined relative to previous periods as households reduce exposure to unsecured loans.
Retail lending, which often supports smaller purchases and short-term consumer financing, recorded modest growth during the period.
Inflation and economic outlook
At the end of the 304th meeting of the MPC, the Governor of the Central Bank of Nigeria, Olayemi Cardoso, announced a further 50-basis-point reduction in the benchmark interest rate to 26.5 percent.
Cardoso said the committee adopted the decision after assessing improvements in inflation trends, exchange rate stability, and Nigeria’s external reserves position.
According to him, headline inflation eased to 15.10 percent in January 2026, down slightly from 15.15 percent in December 2025, marking the eleventh consecutive month of year-on-year decline.
Food inflation also dropped sharply to 8.89 percent from 10.84 percent, while core inflation fell to 17.72 percent from 18.63 percent.
On a month-on-month basis, headline inflation declined to –2.88 percent in January, compared to 0.54 percent in December, indicating a continued easing in price pressures.
Cardoso also highlighted improvements in Nigeria’s external sector, revealing that the country’s gross external reserves rose to $50.45 billion as of February 16, 2026, the highest level recorded in more than a decade.
The reserves level provides import cover of about 9.68 months for goods and services, strengthening Nigeria’s external buffer.
Risks remain
Looking ahead, the CBN governor said the outlook suggests that domestic disinflation could continue in the near term, supported by improved food supply and relative exchange rate stability.
However, he warned that increased government spending, particularly election-related fiscal releases, could pose risks to the inflation outlook.
Cardoso reaffirmed that the Monetary Policy Committee would continue to adopt an evidence-based policy framework, focused on maintaining price stability while safeguarding the resilience of Nigeria’s financial system.
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