Nigeria's worsening cost-of-living crisis is pushing millions of households into a debt trap as digital lenders aggressively factor rising default rates into the cost of their loans. Digital loan disbursements rose to $1.63 billion last year, with lenders now charging nearly 20% interest on one-month loans. Unlike conventional lenders, most digital lenders do not treat early facility liquidation differently, with borrowers still paying principal plus full tenor interest charges even if the credit is liquidated a day after disbursement.
Checks by The Guardian show that OPay, which claimed to have accounted for 57.4% of the total value of digital credit disbursed last year, charges low-risk borrowers 18.9% monthly interest through its EaseMoni lending platform. Compounded monthly at that rate, the interest would translate into an effective annual rate of about 698%, excluding fees and other charges. A new PalmPay customer said he had been offered a daily interest rate of 1.5%, which would translate into an effective monthly rate of about 56.3% if compounded daily.
The treatment of default penalties by digital lenders is even more complicated, with penalties often calculated as certain percentages of the principal and accrued interest, and may be applied daily. For customers with poor credit ratings, interest rates are even higher, with some approaching 25% monthly. Despite the cut-throat cost, short-term loans have become a means of meeting immediate needs for millions of Nigerians, raising concerns that the trend could deepen the financial vulnerability of struggling citizens.
The shift is increasingly visible in the expansion of digital lending platforms, particularly OPay, which has grown from a payments-focused fintech into a major consumer-credit provider. The number of its quarterly borrowers surged to 6.7 million in the first half of 2026, from 3.5 million a year earlier, while income from loans overtook earnings from payment-related services. OPay's latest filing with the United States Securities and Exchange Commission shows that it disbursed $927.63 million in new loans in the first half of 2026, a 204% increase from $305.12 million in the corresponding period of 2025.
OPay is not alone in expanding credit through digital financial services, with Moniepoint Microfinance Bank reporting that it disbursed more than N1 trillion in loans to small businesses in 2025. Its chief executive, Tosin Eniolorunda, said the next phase of the bank's growth would centre on credit built on payment rails. FairMoney Microfinance Bank also reported that it disbursed more than N150 billion in loans during the same period.
The Federal Competition and Consumer Protection Commission has granted full or conditional approval to nearly 500 digital money-lending apps, while more than 100 illegal or non-compliant platforms have been flagged, blacklisted or delisted from the Google Play Store over alleged privacy violations, harassment and other lending abuses. Analysts have warned that easier access to credit poses serious risks to households, with concerns mounting over high interest charges, aggressive debt recovery and loan refinancing.
The 2026 Access to Financial Services in Nigeria survey found that 40.8% of formal borrowers took loans mainly to meet expenses or finance consumption, up from 31.7% in 2023. Formal financial inclusion rose to 73% of adults in 2026, from 64% in 2023, while formal credit use increased from 6% to about 10%, equivalent to 11.9 million people. However, wider access has not eliminated repayment difficulties, with 45.8% of formal-credit users reporting some or serious repayment stress.
Key points
- Digital loan disbursements in Nigeria rose to $1.63 billion last year.
- OPay charges low-risk borrowers 18.9% monthly interest through its EaseMoni lending platform.
- The Federal Competition and Consumer Protection Commission has granted approval to nearly 500 digital money-lending apps.
