Thirty-two million Nigerians are set to benefit from the recently launched consumer credit scheme as the programme begins in May 2024. With the new scheme, the standard of living of Nigerians is set to rise in view of the expected boost in people’s abilities to afford basic necessities of life such as feeding, accommodation, healthcare services, among others.
The 32 million Nigerians in line to benefit from the first phase of the consumer credit scheme comprise the nation’s 720,000 federal civil servants, 3.85 million state civil servants, and 27.3 million other white-collar workers as well as those in the informal sector.
The Nigerian Observer estimates that if a worker within the categories identified above obtains an average of N500,000 consumer credit annually, the nation’s consumer credit market will balloon to at least N15.93 trillion annually, indicating the huge opportunities that lie ahead for the Nigerian economy.
The second phase of the scheme will take off in May 2025, for over 70 million other Nigerians, the Nigerian Observer has learnt.
It should be recalled that on April 24, 2024, President Bola Ahmed Tinubu approved the take-off of the consumer credit scheme.
“Consumer credit serves as the lifeblood of modern economies, enabling citizens to enhance their quality of life by accessing goods and services upfront, paying responsibly over time. It facilitates crucial purchases, such as homes, vehicles, education, and healthcare, essential for ongoing stability to pursue their aspirations,” said Ajuri Ngelale, Special Adviser to the President on Media & Publicity.
“Through responsible repayment, individuals build credit histories, unlocking more opportunities for a better life. Additionally, the increased demand for goods and services stimulates local industry and job creation,” Ngelale further said.
He added that the scheme will strengthen Nigeria’s credit reporting system, boost credit guarantees, promote responsible consumer credit, thereby improving the quality of lives of Nigerians.
The FG’s intervention into the consumer credit comes at a time the leading banks in the nation, tread cautiously when it comes to consumer financing, thus preventing them from meeting the needs of most Nigerians, a phenomenon partly attributed to data paucity and inadequate credit history on the part of bank clients, as well as high interest rate in the country.
For instance, out of the total loans and advances of N7.06 trillion granted to businesses and households in 2023 by Zenith Bank, just 8 percent or N565 billion went into the consumer credit portfolio.
In 2022, the bank gave out N329.6 billion as consumer credit out of N4.12 trillion total loans and advances it granted to business and households in that year.
GT Bank granted just N188 billion as loans and advances under its consumer credit portfolio in 2023 out of N3.85 trillion deposits mobilised from 32.4 customers within the same business segment.
For First Bank Holdings, only 4.6 percent of its total loans and advances could be classified as those that went into consumer credit portfolios as of September 2023. In 2022, consumer credit loans amounted to 3.4 percent and 2.6 percent in 2021.
One of the areas the new scheme will make an immediate impact is housing. According to the Centre for Affordable Housing in Africa (CAHF), a significant portion of urban dwellers in Nigeria live in slums, requiring an urgent strategy to get them affordable housing with basic infrastructure.
“A significant concern is the high percentage (58.8%) of the urban population living in slums, indicating a substantial demand for affordable housing with basic infrastructure. Challenges in the housing sector include the high cost of building materials, exchange rate fluctuations, and land acquisition issues,” CAHF said.
The launch of the consumer credit scheme is also expected to boost retail sales which have been predicted to contract in 2024, pressured by the rising inflation rates, which is expected to constrain discretionary spending, according to the Financial Derivatives Company (FDC), Lagos-based research cum investment firm, citing the Economist Intelligence Unit (EIU).
“Retail sales in real terms to contract by 6.3% in 2024 from 6.6% in 2023, due to constraints on purchasing power. We expect the drag on discretionary spending to persist in 2024 as the impact of the policy reforms lingers.
“Sales will start to level off in 2025 before rising by an average of 3% annually in 2026-27, aided by an ease in inflation and greater exchange rate stability. In the long term, Nigeria’s retail prospects will be supported by a rising young population (more than 97% of Nigerians are under 65).
“However, foreign investors will remain cautious, given the country’s difficult operating conditions and volatile economy,” FDC stated in early April.
