Nigeria’s digital lending industry is undergoing a significant shift as lenders scale back unsecured instant loans and increasingly target borrowers with verifiable income, established credit histories and predictable cash flows.
The change is being driven by a combination of tighter regulatory requirements under the Federal Competition and Consumer Protection Commission’s (FCCPC) Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations, 2025, rising default risks and the growing cost of originating and recovering small loans.
Stakeholders who spoke to Nairametrics said the new regulatory environment has made it more difficult for lenders to rely on aggressive debt recovery practices or extend credit to borrowers whose ability to repay cannot be established.
Instead, lenders are increasingly moving towards structured instalment loans, longer tenures and business financing, where repayment can be linked to identifiable sources of income or verifiable business cash flows.
Speaking with Nairametrics, CEO of KwikPay Credit and President of the Money Lenders Association, Mr. Gbemi Adelekan, said the industry is moving away from unsecured nano loans, typically with a maximum tenure of about 30 days, because of the high default rates associated with the model.
According to him, lenders are now focusing on business loans with verifiable cash flow and financial transactions.
Also speaking, an executive of a digital lending company, who asked not to be named, said the company has reduced its exposure to unsecured lending and is concentrating more on customers with demonstrated repayment capacity.
For digital lenders, the challenge extends beyond regulation and borrower behaviour. The underlying economics of nano lending have also become increasingly difficult.
Speaking with Nairametrics, CEO of Sycamore, Babatunde Akin Moses, said lenders have to consider the full cost of originating, underwriting, monitoring and recovering loans before determining whether a small credit product remains commercially viable.
He illustrated the challenge by comparing a N1 million loan to a single borrower with distributing the same amount in N5,000 loans.
According to him, those 200 borrowers still have to be onboarded, assessed, monitored and followed up for repayment, potentially requiring relationship officers, recovery agents and technology infrastructure.
The operating cost, he said, can therefore become disproportionately high relative to the value of each individual loan.
Moses said the challenge is compounded by fraud, recovery difficulties, funding costs, regulatory requirements and changes in customer behaviour.
Meanwhile, the shift to digital lenders comes even as demand for digital credit continues to rise amid pressure on household incomes and the increasing cost of living.
According to Adelekan, loan applications have increased as Nigerians seek short term credit to supplement their incomes.
The FCCPC’s intervention has also significantly changed the risk associated with loan recovery.
Adelekan said unethical collection practices have reduced considerably since the Commission began enforcing stricter requirements on digital lenders.
He said unregistered lenders are increasingly finding it difficult to operate through mainstream digital platforms because app stores and payment platforms enforce regulatory requirements imposed on lending businesses.
He said the FCCPC has adopted a zero-tolerance approach towards harassment and other abusive recovery practices, with sanctions for lenders found to be engaging in such conduct.
Amid the implementation of the FCCPC rule, which mandates registration for all digital lenders in the country, checks by Nairametrics show that the number of lenders registered with the Commission has increased to 525.
Aside from the 525 fully approved by the FCCPC, there are 33 other digital lenders granted registration waivers by the Commission because they are already licensed by the Central Bank of Nigeria (CBN).
Most of the registered companies operate more than one app, bringing the total loan apps under the watch of the FCCPC to over 1,000.
Meanwhile, a total of 112 loan apps are currently under the watchlist of the Commission, while 54 apps have been deleted from the Google Play Store for violating the regulator’s rules.
The regulatory shift is rooted in the FCCPC’s Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations, 2025, commonly referred to as the DEON Regulations.
The court upheld the validity of the DEON Regulations and found that they were made within the FCCPC’s statutory and constitutional powers. It also upheld the specific provisions challenged in the suit and discharged the interim order that had prevented implementation and enforcement.
Following the judgment, the FCCPC announced the immediate resumption of implementation and enforcement of the regulations.
