• Nigerian household debt reached a record \$38.7 billion in April 2025, 20.4% of GDP, surpassing corporate debt
• Inflation (23%) and low incomes are driving borrowing for consumption and small business needs
• Rising defaults pose risks to banks, especially smaller ones, despite strong profits at major lenders

Nigerian household debt reached a record $38.7 billion in April 2025, according to the Global Debt Monitor from the Institute of International Finance (IIF), a Washington-based association representing over 400 global financial institutions. This figure marks the highest level in two decades, significantly increasing from $4.6 billion in 2005. Household debt now surpasses the combined debt of non-financial and financial corporations, which stand at $12.6 billion and $23.4 billion, respectively. Only public debt, estimated at $98.8 billion, remains higher.

According to the IIF, household debt is the financial commitments individuals and families undertake for personal consumption or investment. This includes mortgage loans, consumer credit, and bank overdrafts. While the data does not explicitly state if sole proprietorships are included, regional trends suggest the debt primarily relates to private households, with small family businesses often accounted for separately.

This debt represents 20.4% of Nigeria's gross domestic product (GDP). This is a high ratio for an emerging economy, especially given persistent inflation, which was 23% in February 2025 according to the Central Bank of Nigeria. Furthermore, per capita income in Nigeria remains low at around $2,000, according to the World Bank in 2023.

Debt Use in Nigeria

The IIF report lacks detailed data to provide a precise breakdown of loan types. However, in Nigeria, an underdeveloped mortgage market, accounting for less than 1% of GDP according to the World Bank, suggests that consumer credit and bank overdrafts likely dominate. A February 2025 Central Bank of Nigeria report indicated consumer loans saw a slight dip from $2.6 billion in January to $2.5 billion in February. This reflects growing caution among banks regarding default risks.

Conversely, outstanding credit in the agriculture and services sectors, often driven by family-run businesses, has seen a modest increase. This highlights small, informal businesses' increasing reliance on credit due to limited access to formal savings mechanisms. Banking penetration in Nigeria is only around 40%, according to the World Bank.

Among African countries analyzed by the IIF, including Egypt, Ghana, Kenya, Nigeria, and South Africa, Nigeria stands out for its high level of household debt. However, it remains below South Africa's $125 billion. South Africa's higher figure is attributed to a greater per capita GDP, around $6,000, and a more developed financial market.

In terms of the debt-to-GDP ratio, Nigeria's 20.4% exceeds Kenya's 12.5% and Ghana's 15.8%, but remains below South Africa's 35.2%, based on IIF estimates.

Risks to Nigeria's Banking Sector

High household debt presents challenges for Nigeria's banking sector, which comprises 23 institutions. Twelve of these institutions are listed on the Lagos Stock Exchange. S&P Global Ratings warned in February 2025 of pressures from inflation and high interest rates affecting borrower solvency. Non-performing loans are rising rapidly. Livingtrust Mortgage Bank, for example, recorded an average annual growth of 68.7% in such loans over five years. Guaranty Trust Bank, the top performer in this regard, saw 8.7%.

Despite these risks, large banks such as Zenith Bank and Guaranty Trust are reporting record profits. This is supported by strong capitalization, with Tier 1 capital ratios above 15% according to Fitch Ratings in December 2024. This resilience contrasts with the vulnerability of smaller institutions, which face greater exposure to household defaults.

Several factors contribute to the rise in Nigerian household debt. Persistent inflation is the primary challenge, with a 23% rate in February 2025 steadily eroding household purchasing power. This forces families to borrow to maintain their standard of living. Stagnant real per capita incomes worsen the situation; average annual economic growth over the past decade was only 2.5% according to the World Bank, insufficient to offset monetary erosion.

Structural dependence on imports also adds to the strain. The naira's depreciation, about 50% since 2023, has significantly increased the cost of imported goods. This fuels inflation and pushes households to take on more credit simply to afford basic necessities. Finally, low financial inclusion in the country, with only 40% of the population banked, leaves many households reliant on informal or high-interest loans due to a lack of accessible savings and financing alternatives.

Household debt, now exceeding corporate debt, amplifies Nigeria's macroeconomic vulnerabilities. Consumption, which accounts for approximately 60% of GDP, could slow as households dedicate a growing share of their income to debt servicing. Furthermore, the country's heavy reliance on oil, accounting for 90% of exports, exposes the economy to external shocks. Meanwhile, public debt, at $98.8 billion, limits the government's capacity for intervention.

Idriss Linge