Nigeria’s loan apps are pulling back from the small loans that built them

Nigeria’s digital lending boom was built on small, instant loans between ₦5,000 ($3.61) and ₦10,000 ($7.21) disbursed within minutes on sleek apps. But that model is beginning to shift.

Digital lenders across the country are retreating from small-ticket loans, shifting toward larger loans and borrowers with verifiable income as regulatory pressure, tighter privacy rules, and rising recovery costs erode the economics of nano-lending.

Many early loan apps depended on intrusive phone data, SMS logs, contacts, and app activity to assess borrowers and pressure defaulters. When borrowers defaulted, some lenders resorted to shaming tactics by sending disgraceful messages to their contacts.

Regulators and platform operators have since curtailed those practices, stripping lenders of both a key risk-assessment tool and a crude enforcement mechanism.

“Nano loans were started by the Chinese companies that entered the money lending space,” Adedeji Olowe, founder and chief executive officer of Lendsqr, a Nigerian loan management startup, told TechCabal. “It was quick cash. But along the line, the Federal Competition and Consumer Protection Commission (FCCPC) started cleaning house, and many people [lenders] cut back.”

Nigeria’s digital lending market has expanded rapidly as households turn to short-term credit to cope with rising living costs and limited access to traditional bank loans. As of February 24, 2026, the FCCPC had authorised 474 digital lenders operating across the country.

Consumer credit stood at ₦3.11 trillion ($2.24 billion) in the third quarter of 2025, according to the Central Bank of Nigeria (CBN), with personal loans accounting for more than two-thirds of lending activity. However, this growth also exposed many users to widespread abuses.

In 2022, the FCCPC introduced a regulatory framework to curb illegal activities, including the harassment of borrowers and their contacts in the sector. In 2025, the commission introduced fines between ₦50 million ($36,046) and ₦100 million ($72,093), or 1% of annual turnover, for lenders who engage in unethical conduct and other violations.

“The FCCPC tightened the screw and collaborated with Google,” Olowe said. “Because these lenders were depending on data accessed from phones to engage in nano loans and embarrass their customers. Once those capabilities were taken away, it was impossible to do a lot of it anymore. So, companies pulled back.”

Nano-loan economics stopped working

Without phone-data access, lenders are increasingly relying on credit bureaus to check borrowers’ histories, according to Olowe. But these checks add new costs to already thin margins.

For a ₦5,000 ($3.61) loan, those costs quickly eat into potential profits.

The cost of recovering small loans also makes the model difficult to sustain.

“If someone owes you ₦10,000 ($7.21), spending ₦200,000 ($144.19) to write a letter and follow up doesn’t make sense,” Olowe said. “It is a different case if this is ₦1 million ($720.93).”

High interest rates are squeezing lenders

A high-interest-rate environment is compounding the challenge. 

Nigeria’s Monetary Policy Rate (MPR), the benchmark interest rate set by the CBN to control inflation, manage money supply, and influence borrowing costs in the economy, stood at 26.5% in February, raising the cost of funds for lenders.

“To cover the high cost of funds, money lenders may have to charge interest rates as a result of the MPR rate that many borrowers may find unsustainable due to their low income, which ironically leads to even more defaults,” said Gbemi Adelekan, president of the Money Lenders Association, an industry group for registered digital money lenders.

Nano loans are inherently risky, Adelekan added, because most borrowers operate in the informal sector, where repayment behaviour is harder to predict. 

“Our members are shifting away from high-risk, small-ticket nano loans toward quality and customers with verifiable income to reduce our non-performing loans,” he said.

Nigeria’s banking industry’s NPL ratio, the percentage of a bank’s total loan portfolio that is in default or close to default, stood at about 7% in 2025, above the threshold of 5%.

Macroeconomic pressures are also reducing the relevance of tiny loans.

“What ₦10,000 could buy when some digital lenders started nano loans years ago isn’t the same in 2026,” said Babatunde Akin-Moses, co-founder of Sycamore, a digital lending app.

Some lenders still offer small loans, though often within a wider range of credit products.

“There are still many prominent lenders that offer nano loans, but we are seeing more balance,” Akin-Moses said.

Newcredit and Palmcredit, for instance, offer loans between ₦10,000 ($7.21) and ₦800,000 ($576.74), while Easemoni disburses between ₦3,000 ($2.16) and ₦2 million ($1,442).

“Lenders are simply working with what makes them less prone to risk,” Adeshina Adewumi, CEO of Trade Lenda, a digital bank for small businesses, said. “Even farmers today, their average request is around ₦500,000 ($360.46) upwards for small-scale farming. Most who request nano loans might end up diverting the funds for personal use.”

Trade Lenda still offers microloans between ₦5,000 ($3.61) and ₦20,000 ($14.42) for first-time borrowers, typically for 30 to 90 days, but the company has seen its minimum loan ticket for businesses go from ₦50,000 ($36.05) to ₦100,000 ($72.09).

Meanwhile, more established fintechs are entering the credit market using alternative data to reduce risk.

Moniepoint is underwriting loans using payment data from businesses on its platform, while asset-financing company M-KOPA uses repayment histories from device financing to build proprietary credit scores before offering small cash loans.

The shift suggests Nigeria’s digital lending industry is evolving beyond quick emergency credit.

“It shows a maturing industry that is balancing speed of disbursement with risk management,” Akin-Moses said.