Consumer Credit As Catalyst For Economic Revitalization

A Financial Perspective on Consumer Credit in Nigeria

Consumer credit plays a vital role in driving economic growth and fostering job creation, as argued by Adenremi Abdul. Recognizing the significance of consumer credit, President Bola Ahmed Tinubu established the Nigerian Consumer Credit Corporation (CreditCorp) with the aim of revitalizing the economy, generating employment opportunities, and promoting the growth of local industries. Consumer credit is not limited to cash disbursement; rather, it serves as a powerful force behind economic growth, stimulating demand, and creating jobs on a global scale. Nigeria must embrace this potential for sustainable development.

Historically, consumer credit in Nigeria has catalyzed industrial expansion and employment generation. In the 1950s and 1960s, the government employed policies aimed at stimulating industrial growth, with consumer credit facilitated by private finance companies through hire-purchase agreements. This access to credit led to increased consumer spending, boosted demand for locally produced goods, and supported the manufacturing sector’s growth.

However, the introduction of the Structural Adjustment Programme (SAP) in the 1980s, coupled with unrestricted importation and high-interest rates, resulted in reduced credit availability and affordability for households. This shift negatively impacted local industries heavily reliant on consumer credit, rendering them unable to compete against cheaper imports and leading to a gradual decline and substantial job losses in these sectors.

Currently, consumer credit penetration in Nigeria is critically low, accounting for less than 10% of total private sector credit by banks and less than 3% of GDP. This disparity becomes apparent when comparing Nigeria to peer African economies such as South Africa (40%), Kenya (10%), Egypt (12%), and Morocco (30%). The limited penetration primarily focuses on cash loans, with minimal utilization of consumer credit to drive the productive sectors of the economy.

The Nigerian Consumer Credit Corporation (CreditCorp) aims to address this low consumer credit penetration through three key pillars: credit infrastructure, cultural re-orientation, and capital. By collaborating with financial institutions, credit bureaus, and regulatory bodies, CreditCorp plans to strengthen credit infrastructure, increase consumer inclusion in credit databases, and enhance the quality of credit information. Furthermore, promoting financial literacy programs will educate consumers on responsible lending and borrowing practices, bringing about a cultural shift necessary for the sustainability of the consumer credit system.

Lastly, CreditCorp intends to provide wholesale lending to expand the reach of consumer credit, particularly to underserved households. By offering guarantees that mitigate lending risks, both local and international wholesale capital will be attracted. To avoid fueling mass importation of foreign goods, CreditCorp will align consumer credit expansion with the President’s Buy Made-in-Nigeria campaign. Credit guarantees will support industries manufacturing within Nigeria, leading to a virtuous cycle where increased consumer demand drives higher production volumes, achieves economies of scale, and ultimately results in lower prices for consumers. In summary, CreditCorp is committed to establishing a balanced and sustainable consumer credit system that supports local industries, enhances purchasing power, and contributes to economic growth and stability.

The potential impact of consumer credit on Nigeria’s economy cannot be understated. It presents an opportune moment for unlocking economic growth, empowering citizens, and revitalizing competitive Made-in-Nigeria goods and services. Nigeria must seize this opportunity with the right approach.

By Otunba Abdul, Chairman of the Nigerian Consumer Credit Corporation