Loan sharks are churning out libellous messages, threats, and taking unlawful actions that are causing many Nigerians to slip into depression, with some unverified reports alluding to a rise in mental ill-health and suicide.
Nigerians are turning to expensive emergency loans to cover the cost of essentials, as the country’s economic woes push more people into poverty and fears grow of a consumer debt crisis.
And as they do, the loan sharks are churning out libellous messages, threats, and unlawful actions causing many to slip into depression, with some unverified reports alluding to a rise in mental ill-health and suicide
High inflation and a controversial austerity drive by the government have weighed down on Nigerians’ incomes at a time when payday loan providers have become ubiquitous.
“You become enslaved,” said Samuel, the owner of a small dry cleaning company in Lagos who declined to give his surname because of the stigma attached to borrowing in Nigeria. At one point he owed money to four different fintechs at interest rates as high as 40 percent and was paying back one loan with credit from another. The tripling of the cost of petrol since May, following President Bola Tinubu’s removal of $10bn worth of fuel subsidies, had meant he had “no choice but to borrow”, he said.
The loan situation only worsened under Tinubu’s administration, because many resorted to the Fintech loans when hardship began to hit badly under the eight years of the Muhammadu Buhari who himself, along state governors, threw Nigeria into unprecedented loans from multilateral financial institutions.
Nigeria’s debt portfolio is put at N97 trillion with Tinubu officials already talking about fresh loans, amid a controversial confession by the National Security adviser, Malam Nuhu Ribadu, that the previous administration threw the country into bankruptcy.
Unprecedented corruption has also been blamed for the bankruptcy, with unconfirmed reports of corruption against a prominent billionaire and several close family members of the former President.
Recent inflation data highlighted the pressures facing ordinary Nigerians. Food prices are 31.5 percent higher than they were last year. Bus fares in Nigerian cities have on average risen 117 per cent year on year, according to the most recent data from the statistics agency. The depreciation of the naira has also driven up costs in the import-dependent economy, contributing to an overall rise in consumer prices of 27.3 percent in the year to October — the country’s highest inflation level for two decades.
The World Bank said this year that “entrenched inflation” had driven an additional 4million Nigerians into poverty. Some 63 percent, or about 133million people, were already “multidimensionally poor”, according to government statistics, creating fertile conditions for lenders to capitalise on. The country now has almost 200 licensed online lenders, according to Nigeria’s Federal Competition and Consumer Protection Commission, with more believed to be operating illegally. The apps of market leaders OKash and Palmcredit have more than 5million downloads. Many lenders attempt to shame borrowers into repaying their loans by messaging people in their phone contacts saying they are in default. Users of OKash are required to grant the apps access to their contacts, location, SMS, calendar and camera when they sign up.
The company says on its website that this is “a very important part of the evaluation process”. Palmcredit says in its terms and conditions that it requires access to users’ phone history, device identification, contact list, call and text history, and other data. It also warns that it “has the right to alarm contacts to declare the loan if you are late with your payment”. OKash and Palmcredit did not respond to requests for comment. Online lenders typically provide loans without the collateral requirements of most established banks and often charge rates well in excess of Nigeria’s key interest rate of 18.75 percent and the maximum lending rate of 27.24 percent for high-street lenders. Central bank data last week showed lending from high street banks rose rapidly over the second quarter.
Total consumer credit, of which almost three quarters were personal loans, increased 12.2 percent over the three months to June. The official data does not capture emergency lending from payday providers. But financial literacy experts and analysts said they were seeing rising numbers of people resorting to emergency funding to bridge the gap between their costs and their incomes.
A report by the Lagos-based SBM Intelligence consultancy showed that 27 percent of Nigerians who had seen their pay decline had borrowed to augment their income. “The quality of life [of Nigerians] has reduced across all income categories,” said Seyi Awojulugbe, senior analyst at SBM Intelligence, who co-led the report. Oluwatosin Olaseinde, founder of the financial literacy service Money Africa, said economic difficulties had made many people “desperate” and vulnerable to “predatory lenders with high-interest rates.
It is not only the everyday Nigerians that are steeped in debts. Government is also wallowing them.
The Debt Management Office (DMO) puts Nigeria’s total public debt stock at N87.38 trillion in the second quarter (Q2) of 2023, giving an increase of 75.29 percent.
That is a N37.53 trillion increase in total public debt, compared to the N49.85 trillion reported at the end of the first quarter (Q1) of the year.
DMO said the rise in the debt stock was caused by the N22.71 trillion ways and means advances obtained by the federal government from the Central Bank of Nigeria (CBN).
“Nigeria’s total public debt stock as at June 30, 2023, was N87.38tn ($113.42bn). It comprises the total domestic and external debts of the Federal Government of Nigeria, the thirty-six states, and the Federal Capital Territory,” DMO said.
“The major addition to the Public Debt Stock was the inclusion of the N22.712 Trillion securitized FGN’s Ways and Means Advances.”
● Additional repot by ft.com