• Digital lending apps in Nigeria face scrutiny over annual interest rates exceeding 300%, affecting vulnerable borrowers
• Consumers suffer from exploitative lending practices, trapped in cycles of recurring debt and hidden charges
• Call for CBN to enforce interest rate caps and enhance consumer protections to safeguard low-income Nigerians

Pascal Oparada is a journalist with Legit.ng, covering technology, energy, stocks, investment, and the economy for over a decade.

Digital lending platforms in Nigeria are facing renewed scrutiny after the Chairman of the Alliance for Economic Research and Ethics, Dele Oye, warned that some loan apps are charging annualised interest rates exceeding 300 per cent, trapping millions of financially vulnerable Nigerians in a worsening cycle of debt.

Oye called on the Central Bank of Nigeria (CBN) and other financial regulators to urgently intervene by introducing interest rate caps for digital lenders and strengthening consumer protection measures to curb what he described as exploitative lending practices.

Millions trapped by high-cost digital loans

In a statement, Oye said the rapid growth of digital lending has provided quick access to credit for many Nigerians excluded from traditional banking services. However, he argued that the sector has also become a source of financial hardship due to excessive interest rates, hidden charges, and harsh repayment conditions.

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According to him, the situation reflects a broader economic challenge where poverty itself has become increasingly expensive.

"In the complex economic landscape of Nigeria, it is profoundly expensive to be poor," he said, describing the phenomenon as the "poverty premium," where individuals with the least financial resources consistently pay the highest prices for credit, goods, and essential services.

Borrowers face soaring repayments

Oye cited cases where borrowers received loans of N65,000 but were required to repay N93,000 within just seven days.

In some instances, missed repayment deadlines reportedly pushed the total debt to as much as N158,000 after penalties and additional charges.

He warned that such lending practices leave borrowers trapped in recurring debt, forcing many to take fresh loans simply to settle existing obligations.

According to Oye, many Nigerians resort to digital loan apps because they cannot access affordable credit from commercial banks, making them easy targets for high-cost lenders.

Poverty comes at a higher cost

Beyond digital lending, Oye argued that low-income Nigerians pay disproportionately more for everyday necessities because they lack the financial capacity to buy goods in bulk.

He explained that wealthier households can purchase items such as a 50-kilogram bag of rice, reducing their cost per kilogram, while poorer families often buy food in small daily quantities at significantly higher prices.

These frequent purchases, he noted, expose low-income earners to constant price fluctuations driven by transportation costs and market conditions.

Healthcare and housing worsen financial burden

Oye also highlighted healthcare as another area where poverty imposes significant financial penalties.

He noted that many families delay seeking treatment because they cannot afford routine medical care, allowing minor illnesses to deteriorate into more serious and expensive health conditions.

For example, he said, a N5,000 malaria test that is postponed due to financial constraints could eventually result in a N50,000 hospital admission.

Housing remains another major challenge, with many renters reportedly spending between 40 and 50 per cent of their monthly income on accommodation, according to a report by The Guardian.

He added that landlords' demands for one or two years' rent upfront continue to deepen financial hardship for low-income households.

Call for stronger regulation

Oye urged the CBN and relevant regulatory agencies to take decisive action by enforcing stricter oversight of digital lending platforms, introducing reasonable interest rate limits, and expanding consumer protection measures.

He argued that while digital lending plays an important role in improving financial inclusion, the industry must be regulated to prevent vulnerable Nigerians from being trapped in unsustainable debt cycles that further entrench poverty.

FCCPC updates list of approved loan apps

Legit.ng earlier reported that Nigeria’s digital lending space has grown rapidly, but so have concerns over harassment, hidden charges, and data privacy violations.

As the Federal Competition and Consumer Protection Commission (FCCPC) resumes stricter regulation of online lenders, borrowers are being urged to deal only with approved loan apps.

The FCCPC, working alongside the Central Bank of Nigeria (CBN), has updated its registry of digital lenders, with over 170 companies now either fully approved or conditionally approved to operate legally in the country.