Nigeria’s digital lenders hit 425 amid loan default, credit woes

The number of companies officially registered and licensed to offer digital lending services in Nigeria has surged to 425 as of May 2025, marking a significant jump from 320 in 2024, according to new data from the Federal Competition and Consumer Protection Commission (FCCPC).

The spike in numbers reflects the increasing adoption of mobile-based credit services in the country, particularly among small businesses and low-income earners who rely on short-term loans for daily survival.

Of the 425 digital lenders, 362 companies have secured full approvals from the FCCPC, while 42 others are operating with conditional approvals.

In addition, 21 firms are licensed by the Central Bank of Nigeria (CBN) to provide digital credit services.

However, despite the regulatory growth, the rapid expansion of the digital lending space is accompanied by growing concerns over indiscriminate loan disbursement and borrower indebtedness.

Industry experts warn that the current system is fuelling a cycle of default, as borrowers move from one platform to another, accumulating unpaid loans.

According to Mr. Gbemi Adelekan, Chairman of the Money Lenders Association (MLA), the surge in licensed digital lenders can be traced to an influx of new players, including many retired bankers, looking to remain active within the financial ecosystem.

He also noted that digital lending provides a cheaper and less regulated entry point compared to microfinance banking.

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“If you think of microfinance, the regulation is tighter and the licence is costly. This is why many companies are coming into the space,” he said.

Adelekan, however, cautioned that new entrants are adopting aggressive strategies to quickly gain market share—often neglecting credit history checks.

“They push out loans without due diligence. Some give N5,000 as a trial loan, and people simply go from one app to another collecting the same amount without repaying.”

Dr. Adamu Abdullahi, Executive Commissioner of Operations at the FCCPC, stated that the goal of the interim regulation is to trace and identify the entities behind the apps, many of which previously operated anonymously.

“Before this regulation, we couldn’t trace who was behind these apps. Now, we can hold them accountable,” he said.

Abdullahi added that while the FCCPC is committed to protecting consumers, it also recognizes the vital role digital lending plays in providing access to credit for underserved Nigerians.

Despite regulatory gains, hundreds of unregistered digital lenders continue to operate in the shadows, attracting desperate borrowers with instant cash offers. These illegal operators often sidestep ethical standards and are not answerable to any authority.

Experts believe that unless stronger real-time credit reporting mechanisms and stricter enforcement actions are implemented, the industry could spiral into a debt crisis that would harm both lenders and the broader financial system.