The number of officially registered and licensed digital lending companies operating via mobile apps in Nigeria has surged to 425 as of May 2025, marking a significant jump from 320 reported in the previous year. This rapid growth underscores both the increasing demand for quick-access loans and the relatively low barrier to entry into the digital lending market. However, it also reveals mounting challenges, particularly regarding borrowers defaulting on loans and the inefficiencies of the nation’s credit reporting system.

Licensing Breakdown and Regulatory Oversight

According to updated records from the Federal Competition and Consumer Protection Commission (FCCPC), 362 of these companies have received full approval, while 42 currently operate under conditional approvals. Additionally, 21 firms in this space are licensed directly by the Central Bank of Nigeria (CBN). These regulatory efforts are part of a broader campaign to bring order to Nigeria’s rapidly expanding digital lending ecosystem, which has previously been plagued by customer abuse, privacy violations, and predatory interest rates.

Despite the increase in registered players, unlicensed and unregulated lending apps continue to operate unchecked. This duality in the market is placing extra pressure on regulators like the FCCPC and CBN to enhance enforcement and consumer protection measures.

A Surge of Ex-Bankers and Ease of Market Entry

Gbemi Adelekan, Chairman of the Money Lenders Association—the umbrella body for many of these loan companies—explained that a significant number of former banking professionals are joining the digital lending space. Many of these ex-bankers, after retiring or exiting traditional financial institutions, are leveraging their experience to establish or join new digital lending startups.

Adelekan attributed this trend to the relative ease of entry into digital lending compared to microfinance banking. Microfinance institutions face tighter regulations and higher licensing fees, making digital lending a more attractive and less burdensome alternative for entrepreneurs.

However, he raised an alarm over how new entrants aggressively issue loans in a bid to rapidly build customer bases. According to him, some lenders offer small starter loans, typically N5,000, to applicants requesting higher amounts like N50,000—just to onboard new customers quickly. Unfortunately, this strategy has enabled many borrowers to hop from one app to another, collecting multiple loans without repayment, effectively gaming the system.

A Broken Credit Reporting System Fuels Indebtedness

At the heart of this mounting debt problem lies Nigeria’s underdeveloped and inefficient credit reporting infrastructure. While credit bureaus are legally mandated to maintain records of individuals’ credit histories, their inability to update information in real time is a major flaw.

Adelekan emphasized that current credit reports often lag by up to 30 days, allowing borrowers to accumulate debts across numerous platforms before any default reflects in their records. He revealed a shocking case of a single borrower who owed 35 different lenders and was still attempting to access new loans, undetected.

Mr. Uzoma Nwagba, CEO of the Nigeria Consumer Credit Corporation (CREDICORP), reinforced this concern in a recent interview. He pointed out that although commercial banks are required to report loans to credit bureaus under the Credit Reporting Act, those reports often do not reach all relevant registries. This gap in data dissemination leaves lenders vulnerable to being misled by incomplete credit profiles.

To address this systemic failure, Nwagba disclosed that CREDICORP, in collaboration with the CBN, is working on a comprehensive review of the country’s credit reporting framework. This initiative includes plans to introduce an executive bill to the National Assembly that would strengthen data sharing protocols and expand credit reporting coverage.

He further suggested that borrowing behavior should carry broader implications, such as affecting the renewal of passports or eligibility for rental agreements. By making credit history a ubiquitous part of financial and civic life, Nwagba argued, individuals would be more incentivized to uphold their obligations.

Unregistered Apps Continue to Operate Amid Consumer Abuse

While regulatory authorities have made progress in registering a large number of digital lenders, the battle against rogue operators remains far from over. The FCCPC recently flagged 88 unlicensed lending apps, placing them under a public watchlist due to repeated infractions, including harassment, blackmail, and defamation of defaulting borrowers through their contact lists.

In addition, 47 offending apps have been delisted from the Google Play Store following regulatory action. The Commission continues to work with Google and other digital platforms to ensure stricter compliance and faster response times when consumer complaints arise.

According to Dr. Adamu Abdullahi, the FCCPC’s Executive Commissioner of Operations, one of the most critical aspects of the commission’s regulation is the requirement for digital lenders to disclose their physical business addresses, corporate ownership, and operating structures. This was largely absent before the Interim Regulatory Framework was introduced, making it nearly impossible to hold erring loan apps accountable.

Abdullahi acknowledged that although loan apps have often operated in a gray area, they continue to play a vital role in improving access to credit for underserved populations. He emphasized the FCCPC’s commitment to striking a balance between ensuring consumer protection and encouraging legitimate digital lending as a means to deepen financial inclusion.

Future of Digital Lending: A Crossroads Between Opportunity and Risk

Nigeria’s digital lending sector continues to offer immense potential in terms of reaching millions of financially excluded individuals. However, the current trajectory reveals a troubling gap between growth and regulatory control.

While the influx of new players and capital is spurring innovation, the reckless push for customer acquisition without adequate due diligence is a looming threat to the sector’s long-term credibility. The inability of the credit reporting system to offer real-time updates is being exploited by unscrupulous borrowers, pushing lenders into financial distress and encouraging unsustainable lending practices.

As the Federal Government, CBN, and FCCPC coordinate their responses, stakeholders agree that policy reforms must prioritize improving the speed, coverage, and reliability of credit reporting systems. Without these reforms, digital lending in Nigeria risks collapsing under the weight of its own success.

Public Advisory and Way Forward

For consumers, the advice remains clear: borrow responsibly and understand the terms and consequences of digital loans. Regulatory agencies continue to urge the public to patronize only approved lenders and report harassment or abuse through the appropriate channels.

As Nigeria continues its journey toward a more inclusive financial ecosystem, ensuring that digital lending evolves with strong safeguards, efficient data systems, and ethical practices will determine whether it becomes a tool for empowerment—or a trap of debt for the vulnerable.