Nigeria’s digital lending industry is increasingly moving away from unsecured instant loans as tighter regulations, rising default rates and higher recovery costs push lenders to focus on borrowers with verifiable incomes and established repayment histories.
The shift follows the implementation of the Federal Competition and Consumer Protection Commission’s (FCCPC) Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations, 2025, which prohibit abusive debt-recovery practices and impose stricter requirements on digital lenders.
Industry stakeholders told Nairametrics that lenders are now favouring structured instalment loans, longer repayment periods and business financing tied to identifiable income sources or verifiable cash flows.
Gbemi Adelekan, CEO of KwikPay Credit and President of the Money Lenders Association, said digital lenders were moving away from unsecured nano loans, which typically have repayment periods of about 30 days, because of their high default rates.
He said lenders were instead focusing on customers with reliable income and business transactions that could support repayment.
An executive of a digital lending company, who spoke anonymously, said the company had also reduced its exposure to unsecured lending and was concentrating on borrowers with demonstrated repayment capacity.
The executive said lenders could no longer rely on unethical recovery methods, adding that blacklisting defaulting borrowers might prevent them from obtaining new loans but would not recover the outstanding debt.
The economics of small loans have also become increasingly challenging for digital lenders.
Babatunde Akin Moses, CEO of Sycamore, said lenders must account for the cost of originating, assessing, monitoring and recovering loans before determining whether nano lending remains commercially viable.
He explained that lending N1 million to one customer requires managing a single borrower, whereas disbursing the same amount in N5,000 loans would involve 200 customers, each requiring onboarding, assessment, monitoring and repayment follow-up.
Despite the challenges, Moses said there was still significant demand for nano credit, particularly among Nigerians underserved by traditional financial institutions.
Demand for digital loans is also rising as households face increasing financial pressure and seek short-term credit to supplement their incomes.
Meanwhile, the FCCPC’s regulatory intervention has reportedly reduced abusive debt-recovery practices in the sector. Adelekan said unregistered lenders were also finding it increasingly difficult to operate through major app stores and payment platforms because of regulatory requirements.
The number of digital lenders registered with the FCCPC has now risen to 525, according to checks by Nairametrics. Another 33 lenders have received registration waivers because they are already licensed by the Central Bank of Nigeria (CBN).
Since many registered companies operate multiple apps, more than 1,000 loan apps are currently under FCCPC oversight. The Commission also has 112 apps on its watchlist, while 54 apps have been removed from the Google Play Store for violating regulatory requirements.
The FCCPC’s Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations came into effect on July 21, 2025, following concerns over exploitative lending practices, data privacy violations, harassment and abusive debt collection.
Implementation was temporarily halted following a legal challenge by the Wireless Application Service Providers Association of Nigeria (WASPAN).
However, on July 20, 2026, Justice Allagoa dismissed the suit and upheld the FCCPC’s authority to implement and enforce the regulations, paving the way for their resumption.