In the 2024 budget proposal crafted by the Federal Government of Nigeria, the Federal Government included a substantial allocation of 100 billion naira to establish a Consumer Credit Fund. This fund aims to support and empower consumers across various sectors by providing accessible credit facilities. The fund was incorporated into the existing budget to offset the ever-increasing propensity to borrow money and the ever-increasing cost of living.
Between January and September 2023, consumers in Nigeria went to financial institutions in the hope of obtaining loans amounting to around N740 billion. This brings to light the strain that the economy is now under. The general population is suffering a decrease in their purchasing power and chronic inflation, which are directly responsible for this rise in borrowing behavior seen in the general population.
The Central Bank of Nigeria, through its quarterly economic statistics, revealed a notable surge of 32 percent in consumer credit. This increase signifies a robust uptick in borrowing activities within the Nigerian economy, indicating a heightened propensity among consumers to access credit for various expenditures and investments. During the third quarter of 2023, the amount of money in circulation increased from N2.31 trillion in the fourth quarter of 2022 to N3.05 trillion after the third quarter. Personal loans accounted for 74.8% of this credit, while retail loans accounted for 25.2%. The bulk of this credit volume comprised personal loans owed by individuals.
A further worsening of the cost of goods such as food, fuel, and rent has occurred due to the rising inflation in Nigeria. According to evaluations published by the World Bank, almost 4 million Nigerians have fallen into poverty during the first five months of 2023.
The Federal Government has established a consumer credit fund with 100 billion naira to address these challenges. In response to the issues outlined, here is an attempt to combat such obstacles. In response to the increasing pressures of inflation and the need to provide financial assistance to citizens who are having difficulty coping with growing costs, the initiative is a reaction to both factors.
The Presidential Council for Industrial Revitalization is responsible for establishing an entity known as the Technical Working Group. The objective of this group, which includes representatives from the Central Bank of Nigeria, the National Identity Management Commission, and the Federal Competition and Consumer Commission, is to develop a comprehensive framework to enhance consumer credit in Nigeria. The consumer credit system will be accomplished through the efforts of this group.
As Minister of Industry, Trade, and Investment, Dr Doris Nkiruka Uzoka-Anite underlined the necessity of an efficient consumer credit system to boost market efficiency and eliminate inequities in consumption and production. She also emphasized the importance of an effective consumer credit system. The Technical Working Group’s mission is to devise and implement a functional and sustainable framework in terms of institutions and regulations to enhance the environment in which consumers can access credit. This is a component of the mission that the organization is working toward.
During the first gathering of the Technical Working Group on Consumer Finance, Uzoka-Anite emphasized the need for a consumer credit system that is both efficient and effective. Providing people with rapid access to credit and encouraging financial inclusion, she said that such a system is an essential component for flourishing economies because it supports financial inclusion.
In addition, the Minister drew attention to the challenges Nigerians face while seeking to get loans for their financial needs. The following are some of the difficulties encountered:
- Stringent eligibility requirements.
- High-interest rates.
- Obstacles related to identity.
- Fragmented data sources for proof of livelihood and financial worth.
- A need for awareness and understanding of credit procedures.
- An inadequate amount of credit is available for lending.
By establishing the consumer credit fund, the government of Nigeria is bringing its efforts into harmony with the larger goal of supporting economic growth and lessening the severity of the financial troubles that residents in the country are facing. The Federal Government will accomplish it through the formation of the fund.
