Nigeria’s consumer credit market recorded its first contraction in more than five years as outstanding consumer loans fell by 19.89 per cent to N3.78 trillion in 2025 from N4.72 trillion in 2024, according to the Central Bank of Nigeria (CBN).

The decline, contained in the apex bank’s 2025 Annual Report and Statement of Accounts, marks the first drop in consumer credit since December 2019 and reflects the impact of the country’s prolonged high-interest-rate environment on household borrowing.

The CBN attributed the decline to rising borrowing costs and changes in banks’ lending patterns, which discouraged personal borrowing while encouraging a shift toward retail lending.

According to the report, personal loans fell sharply to N1.85 trillion, driving the overall contraction in consumer credit.

However, retail loans bucked the trend, surging by 63.77 percent to N1.94 trillion, making up 51.16 percent of total consumer credit for the first time in several years, while personal loans accounted for 48.84 percent.

The apex bank also disclosed that consumer credit’s share of total credit extended to the private sector by other depository corporations declined to 6.60 percent in 2025 from 7.98 percent recorded in the previous year.

“Consumer credit outstanding moderated in response to the dynamic interest rate environment. Consumer credit outstanding fell by 19.89 per cent to N3,783.40 billion in 2025 from N4,722.93 billion in the preceding period. The fall was the first since December 2019,” the CBN stated.

The report further showed that short-term credit remained the largest component of banks’ asset portfolios, accounting for 51.60 percent, although its share declined by 7.71 percentage points during the year.

Meanwhile, medium-term deposits increased to 5.15 percent, while long-term deposits declined sharply to 3.85 percent from 7.28 percent.

Latest CBN data show that credit to the private sector rose to N83.26 trillion in June 2026 from N81.04 trillion in May, representing a 9 percent year-on-year increase from N76.13 trillion recorded in June 2025.

The increase comes despite the Monetary Policy Committee’s decision to retain the benchmark Monetary Policy Rate (MPR) at 26.5 percent, one of the highest levels in recent years.

Financial analysts say the decline in consumer credit reflects the impact of tight monetary policy on household finances.

Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said elevated interest rates have significantly reduced consumers’ appetite for borrowing.

According to him, the high cost of credit has made personal loans increasingly unaffordable, forcing households to postpone discretionary spending and rely more on essential retail financing.

He noted that while the CBN’s tight monetary stance is aimed at curbing inflation and stabilising the naira, it has also constrained consumer demand and weakened credit growth in the retail economy.

Similarly, Managing Director of Optimus by Afrinvest, Ayodeji Ebo, said banks have become more cautious in extending unsecured personal loans amid higher default risks and elevated funding costs.

He explained that financial institutions are increasingly prioritising lending segments with stronger repayment structures and lower credit risk, which partly explains the rise in retail loans relative to personal loans.

Economic analysts also believe the gradual increase in long-term credit suggests banks are selectively financing productive sectors capable of generating sustainable returns despite prevailing macroeconomic headwinds.