Nigeria's consumer lending market recorded its first annual contraction in more than five years as rising borrowing costs weighed heavily on household access to credit, according to the Central Bank of Nigeria (CBN).
The apex bank, in its 2025 Annual Report and Statement of Accounts, revealed that outstanding consumer credit declined by 19.89 percent to N3.78 trillion in 2025 from N4.72 trillion recorded in the previous year. The development marks the first drop in consumer credit since December 2019, reflecting the impact of the country's elevated interest rate environment on lending activities.
Despite the overall decline, the report showed a notable shift in the structure of consumer lending, with retail loans expanding strongly enough to overtake personal loans as the largest component of consumer credit.
CBN links decline to interest rate environment
Explaining the trend, the CBN attributed the contraction in consumer credit to higher borrowing costs and changes in banks' lending patterns.
The report stated:
“Consumer credit outstanding moderated, in response to the dynamic interest rate environment. Consumer credit outstanding fell by 19.89 per cent to N3,783.40 billion in 2025, from N4,722.93 billion in the preceding period. The fall was the first since December 2019.”
According to the apex bank, the sharp decline was driven mainly by a reduction in personal loans, which fell significantly to N1.85 trillion during the year.
However, retail lending moved in the opposite direction, rising by 63.77 percent to N1.94 trillion. The increase pushed retail loans to account for 51.16 percent of total consumer credit, while personal loans represented the remaining 48.84 percent, marking a significant shift in the composition of household lending.
The CBN also noted that consumer credit represented a smaller portion of total credit extended to the private sector by other depository corporations, with its share declining to 6.60 percent in 2025 from 7.98 percent recorded in 2024.
Banks continue to favour short-term lending
Beyond consumer credit, the report highlighted changes in banks' overall credit portfolios.
Although short-term credit remained the dominant category of lending, its share declined during the year. According to the CBN, short-term credit accounted for 51.60 percent of the assets portfolio of other depository corporations, representing a 7.71 percentage-point decline from the preceding period.
Medium-term credit also recorded a slight decline of 0.11 percentage points, settling at 13.46 percent.
In contrast, long-term credit gained momentum, increasing by 7.82 percentage points to 34.94 percent, suggesting a gradual shift toward longer-tenor financing.
The apex bank explained that the continued dominance of short-term loans reflects banks' preference for aligning short-term lending with the maturity profile of customer deposits.
According to the report:
“The dominance of short-term loans and advances reflected banks’ preference for matching short-term lending with short-term deposit liabilities.”
Deposit structure also changed
The report further showed that deposits with maturities of one year or less continued to dominate banks' liability portfolios throughout 2025.
Short-term deposit liabilities rose slightly to 91.00 percent, compared with 90.09 percent recorded in 2024.
Medium-term deposits increased by 2.52 percentage points to 5.15 percent, while long-term deposit liabilities declined sharply to 3.85 percent from 7.28 percent in the previous year.
The CBN noted that these changes in deposit maturity occurred alongside the increase in long-term credit, indicating a gradual adjustment in the banking sector's funding and lending structure.
Bigger picture
The latest figures underscore the pressure that elevated interest rates continue to place on consumer borrowing, particularly personal loans, even as retail lending remains resilient.
The decline in consumer credit comes at a time when lending to businesses continues to strengthen. Earlier data showed that credit to Nigeria's private sector rose to N83.26 trillion in June 2026, up from N81.04 trillion in May 2026. On a year-on-year basis, private sector credit increased by 9 percent from N76.13 trillion recorded in June 2025.
The growth in private sector lending has coincided with the CBN's decision to retain the Monetary Policy Rate (MPR) at 26.50 percent, a stance aimed at containing inflation while balancing liquidity and credit conditions in the economy.