Nigeria has made real progress in bringing adults into the formal financial system, but holding a bank account does not guarantee the ability to borrow. As financial services reach a widening share of the population, borrowing costs, limited credit histories and irregular incomes still determine who can obtain formal credit — and on what terms.

According to the 2026 Access to Financial Services in Nigeria (A2F) survey by Enhancing Financial Innovation & Access (EFInA), formal financial inclusion rose to 73%, up from 64% in 2023, while the share of adults excluded from the financial system fell from 26% to 21%. EFInA estimates that 87.2 million Nigerian adults are now formally included, yet only about 12 million — roughly 10% — access formal credit.

The figures point to a core distinction: financial inclusion is not the same as access to credit. Inclusion covers access to and use of services such as payments, savings, insurance and borrowing. A person can hold a bank account, receive payments digitally and save with a formal institution without ever qualifying for a loan.

From a lender's standpoint, the decisive questions are whether a borrower earns enough to repay, whether that income can be verified, what other financial obligations the borrower carries, and how likely they are to keep to the repayment schedule. Nigerians can therefore participate fully in the formal financial system and still struggle to obtain affordable credit.

The contraction in lending underscores the gap. According to the Central Bank of Nigeria (CBN), outstanding consumer credit — loans extended to individuals rather than businesses — fell from ₦4.72 trillion ($3.5 billion) in 2024 to ₦3.78 trillion ($2.8 billion) in 2025, a decline of 19.92%. For borrowers who cannot obtain affordable loans from formal lenders, informal sources have emerged as an alternative, often with fewer procedural barriers. Stears estimates the potential demand for credit among informal borrowers transitioning to formal lending at $621 million.

The problem for borrowers

For borrowers, the problem is not just access to credit but its cost. EFInA found that 16% of adults borrow through informal sources, and 10% from family and friends.

"Alternative finance often wins on lower friction—speed, simplicity, proximity and flexibility," EFInA said.

Nigeria's monetary policy rate, the CBN's benchmark rate, stood between 27% and 27.5% in 2025. The policy rate is not the interest rate consumers pay, but it reflects the wider monetary environment in which lenders operate. When funding is expensive, lenders face pressure to charge more to cover their costs and the risk of non-repayment — and those higher rates, in turn, can make loans harder for borrowers to service.

The arithmetic is illustrative: a ₦100 ($0.075) loan charged at a simple annual interest rate of 27% would accrue ₦27 ($0.02) in interest over one year, bringing repayment to ₦127 ($0.095) before fees.

Without lower interest rates, affordable consumer credit will be difficult to scale. But rate cuts alone will not solve the problem; inflation must also ease sustainably High inflation erodes borrowers' purchasing power and leaves less income available for repayments, while making it harder for lenders to offer cheaper loans without taking on more risk. As inflation eases, the CBN gains more room to reduce its policy rate, potentially lowering funding costs and relieving pressure on lending rates.

The challenge is to bring down both the cost of credit and the financial pressure on borrowers. Until inflation and interest rates ease, lenders will face pressure to charge more for risk, the people who need credit most will continue to struggle with its cost, and formal credit access will remain out of reach for many.

The problem for lenders

Digital lenders have expanded access to borrowing through mobile applications, automated lending decisions and alternative data on prospective customers, filling the gap left where commercial banks have retreated. Banks' loan-to-deposit ratio — a measure of how much of the deposits they hold is lent out to customers — stood at 48.07% in 2025.pdf), below the reported 80% benchmark.

Drawing on transaction histories and repayment records, digital lenders can evaluate people with limited conventional credit histories. But faster lending decisions do not eliminate the underlying financial risk. A lender that approves a loan must still fund the money, service the account and collect repayment. If the borrower defaults, the lender may recover only part of the principal and interest it expected to receive.

This creates a basic economic constraint: lending revenue must cover expected credit losses and all other relevant costs before a lender can make a sustainable profit.

The CBN reported a non-performing loan ratio of 8.03% in January 2026, meaning roughly ₦8 ($0.006) of every ₦100 ($0.075) in bank loans was classified as non-performing — loans on which borrowers have failed to make scheduled repayments, typically for 90 days or more.

Fintech giant OPay's reported lending figures offer a direct illustration of the pressures credit providers must manage. In an SEC filing — a public disclosure to the United States securities regulator — the company reported $938.3 million in loan originations, $260.25 million in loan-financing revenue and $121.29 million in provisions for expected credit losses in 2025. Loan-financing revenue was about 27.7% of originations, while expected credit-loss provisions amounted to about 46.6% of loan-financing revenue.

The figures do not establish OPay's profit per loan, but they show why lenders plan for a substantial share of lending revenue to be absorbed by loans that will not be fully repaid.

An analysis of 300,000 active borrowers by digital lender Credit Direct puts the average loan amount at approximately ₦430,962 ($323.18) for men and ₦478,117 ($358.55) for women. At a hypothetical simple annual interest rate of 28%, those loans would generate ₦120,669 ($90.49) and ₦133,873 ($100.39) in interest, respectively, over one year, before fees. Yet this revenue would not represent profit: lenders must still cover funding costs, operating expenses and losses from loans that are not fully repaid.

For borrowers, the question is whether such debt is affordable. EFInA found that 59% of respondents would struggle to raise ₦156,000 ($116.99) within seven days, suggesting that many Nigerians have limited financial buffers to absorb unexpected expenses or repay loans when they fall due.

What will unlock the market?

International comparisons show how wide the gap remains. In Brazil, account ownership stood at 86.4%, while 45.9% of adults reported formal borrowing. China recorded account ownership of 89.4% and formal borrowing of 40.7%. Kenya recorded 90.1% of adults with a financial account, but only 12.6% reported formal borrowing. South Africa similarly recorded account ownership of 81.1%, compared with a formal borrowing rate of 12.4%.

In these countries, financial inclusion and borrowing are trending upward, driven by improving lending conditions, credit information, household incomes and the availability of suitable loan products. Nigeria's own profile — broad access alongside formal credit use of roughly 10% — sits closer to Kenya's and South Africa's numbers than to Brazil's or China's.

For Nigeria, the challenge is not simply to increase the amount of credit available. It is to make more lending both repayable for borrowers and financially sustainable for lenders. Lower inflation and funding costs could help ease pressure on loan pricing. Better credit information could help lenders distinguish between borrowers with different repayment capacities. Loan sizes and repayment schedules that reflect borrowers' cash flows could also reduce the risk of repayments overwhelming household budgets.

As Nigeria's financial inclusion continues to grow, the quality of inclusion is becoming an increasingly important concern. Without access to credit, formal financial inclusion may not translate into meaningful opportunities for individuals to manage financial shocks, invest in their livelihoods or meet major expenses.

This article is part of TechCabal's Follow the Money series, a weekly examination of the earnings, business models and scaling strategies of African fintechs, financial institutions, companies and governments. A new edition is published every Monday.