Pecohub Nigeria’s worsening cost-of-living crisis is pushing millions of households into a debt trap, even as digital lenders aggressively factor rising default rates into the cost of their loans. Digital loan disbursements rose to $1.63 billion last year.
Unlike a few years ago, when they began operations, digital lenders now charge nearly 20 per cent interest on one-month loans as they struggle to offset a growing number of defaulters.
While borrowers who default for extended periods may end up paying several times what they borrowed, non-borrowing users of digital-first banks also face constant pressure as lenders seek to expand their customer base.
Checks show that OPay, which claimed to have accounted for 57.4 per cent of the total value of digital credit disbursed last year, charges low-risk borrowers 18.9 per cent monthly interest through its EaseMoni lending platform. Compounded monthly at that rate, the interest would translate into an effective annual rate of about 698 per cent, excluding fees and other charges.
A new PalmPay customer who spoke with press said he had been offered a daily interest rate of 1.5 per cent. If compounded daily, that rate would translate into an effective monthly rate of about 56.3 per cent.
The treatment of default penalties by digital lenders is even more complicated. Except where debts are formally restructured, penalties—often calculated as certain percentages of the principal and accrued interest—may be applied daily.
For customers with poor credit ratings, interest rates are even higher, with some approaching 25 per cent monthly.
A user of one of the apps who had never borrowed through it told our correspondent yesterday that she had been offered a monthly interest rate of 19.2 per cent.
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.
Unlike conventional lenders, most digital lenders do not treat early facility liquidation differently. Hence, borrowers still pay principal plus full tenor interest charges even where the credit is liquidated a day after disbursement.
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 (SEC)shows that it disbursed $927.63 million in new loans in the first half of 2026, a 204 per cent increase from $305.12 million in the corresponding period of 2025.
Its quarterly borrowers rose by about 91 per cent, from 3.5 million to 6.7 million. Income from loans reached $236.12 million, exceeding the $130.55 million it earned from payment-related services.
The filing shows that OPay offers personal loans as well as credit to micro, small and medium-sized businesses. The company estimated that its $938.3 million in new loans in 2025 accounted for 57.4 per cent of Nigeria’s total digital loan disbursements of $1.634 billion that year.
OPay is not alone in expanding credit through digital financial services. Moniepoint Microfinance Bank reported 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.
Credit growth, however, does not establish a direct link with the cost-of-living crisis. Some observers say it reflects longstanding gaps in access to formal credit. Others are concerned about whether borrowers can repay their loans as their real incomes shrink.
The Federal Competition and Consumer Protection Commission (FCCPC) 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.
The expansion of regulated lending has improved access to credit for some consumers. However, with concerns mounting over high interest charges, aggressive debt recovery and loan refinancing, analysts have warned that easier access to credit poses serious risks to households.
The expansion of digital credit is taking place against a widening gap between household incomes and living costs. As earnings lose purchasing power, some Nigerians are drawing down their savings, cutting consumption or borrowing to meet expenses that cannot be postponed.
