Three out of every 10 Nigerians now depend on loan apps to buy food and meet other expenses for their survival in the wake of Nigeria’s rising inflation.
Inflation rate hit 26.72 per cent in September while Food inflation for the month was 30.64%, according to data from the National Bureau of Statistics.
However, a new survey conducted by SBM Intelligence revealed that 27% of Nigerians interviewed in major cities, said they now use loans to keep up with their expenses.
The digital lending space in Nigeria continues to boom despite the unethical practices by some of the lenders.
The Federal Competition and Consumer Protection Commission, in April, approved 173 loan apps while there are several others operating without registering with the regulator.
The survey added that 49% of Nigerians earning less than the N30,000 minimum wage spend all their income on food.
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“A survey conducted by SBM Intelligence in major cities in Nigeria found that 49% of people earning less than N30,000 minimum wage spend all their income on food, while 47% of those earning between N31,000 and N50,000 spend their entire income on food. 47% of all respondents said they had cut back on spending, while another 27% said they now use loans to keep up with their expenses,” read the report published on SBM’s website.
Living on loans
Digital loan apps have become attractive to many struggling Nigerians as they require minimal documentation and loans can be accessed through their phones, without visiting a bank.
It was gathered that many Nigerians have multiple sim cards which allowed them to access loans from different digital platforms.
A resident in Lagos state, Samuel Oriade, said he resorted to loan apps after he was disengaged from his contract work at one of the factories around Iju area of Ifako Ijaiye local government area.
“I had nothing to eat or survive on. A former colleague introduced me to it, with the hope that I will repay the loan after securing another job but it is over five months and I am yet to get a stable job. Whenever I have money, I pay back some loans so I can get another,” he said.
Another respondent who asked that his name should not be in print, said the economic hardship pushes a lot of Nigerians to depend on loan apps despite the insults, ridicules and threats debtors are exposed to. He said so many digital loan apps use unconventional means to harass debtors.
“What can a dying man do? So many people can’t provide for their families again because of the situation in the country so they apply for loans. The rate of unemployment in the country is alarming. In fact, many people are also underpaid where they are working so their salaries are inadequate to meet their needs.
“They don’t ask for collateral and you can get as low as N10,000 for urgent needs. So, we apply for the loan because we don’t have any money. You can’t get another one unless you pay the previous one so you use another phone number and detail,” he said.
“There is hardship in the land and nobody is willing to help. The easy way is to access loans from the digital apps. Nigerians are now used to their tricks and threats,” added Mrs Alaba, who said she owes three apps more than N80,000.
A signal of doom
Public policy experts and Economist have called on the government to address the growing poverty in the land, warning that the results of the survey portend dangers for the economic growth of Nigeria.
A public policy expert, Dr Abimbola Oyarinu, who noted that the survey is a reflection of the consequences of the growing inflation in the country, warned that the implications are grievous.
“This is a warning sign that we are retrogressing. Unlike the Asian tigers (Hong Kong, Singapore, South Korea, and Taiwan) which encouraged their citizens to save as part of efforts to boost the economy, we are in a situation where our people depend on loans to feed. This means they don’t have money to invest or do other productive activities. It is also not good for the digital loan apps because they would soon run out of business when there are so many defaulters. The purpose of taking loans is to invest in profitable activities, not to buy food. So when people take out loans to buy food, they can’t pay back. And when the loan apps are out of business, so many people would be jobless and the multiplier effects keep going,” he said.
An economist and former Director General of the Lagos Chamber of Commerce and Industry (LCCI), Dr Muda Yusuf, said the survey is a reflection of the high rate of poverty in the country.
“The implication is that things are very difficult for the citizens because of the high level of inflation, weak purchasing power and very weak disposable income. It is also a reflection that the poverty situation is getting worse; that is what is pushing a lot of people going for loans desperately.
“They are spending it on their priorities – food and maybe, transportation. Outside of those two, there is very little to spend on other priorities and that will affect many businesses that are outside of those two sectors because the demand for those businesses would reduce,” he said.
He urged the government to address macroeconomic challenges fuelling economic hardship.
“We need to stabilise our exchange rate, see how we can improve on foreign exchange supply, reduce demand for imports and the government should also intervene by mitigating the hardship, especially by looking at our import duties regime, so that waivers can be given to some critical items. We should also look at our energy situation because if people have electricity, their demand for PMS and diesel would reduce and that will help alleviate the challenges. Aside the palliatives, government should look at incentives that can trickle down to the masses,” he added
Development expert, Dr Tunde Akanni, who described the results of the survey as alarming and disturbing, said it can obviously trigger high rates of Nigerians’ susceptibility to nutrition related health challenges.
“It’s therefore time for an emergency in the agricultural sector such that a heavy subsidy comparable to that appropriated to PMS over a long time should be immediately considered. You can only talk of creating wealth only when there’s good health,” he said.
