From 22% to 14%: How 6 months of falling inflation is reshaping Nigeria’s digital lending industry

Nigeria’s inflation rate has fallen from 22.22% in June to 14.45% in November 2025, representing a 7.77 percentage point drop in just six months. It’s the steepest sustained decline the country has seen in years, and it’s quietly transforming the ₦2.1 trillion digital lending industry.

For most of 2024 and early 2025, Nigeria’s digital lenders were in survival mode. Inflation was so high that Nigerians weren’t borrowing to buy appliances or expand businesses; they were borrowing just to eat.

Food inflation had soared above 40% in late 2024, forcing millions to take loans for rice, rent, and transport. By January 2025, retail loans had surged 92.2% to ₦1.73 trillion, reflecting desperate survival borrowing rather than productive economic activity.

The problem for lenders was predictable. When people borrow out of desperation, they struggle to repay. Default rates climbed throughout the first half of 2025, with the Central Bank of Nigeria’s Q2 Credit Condition Survey reporting higher default rates for both secured and unsecured lending.

The IMF warned that rising non-performing loans in Nigeria’s fast-growing fintech sector posed potential risks to financial stability.

Then something shifted. In July, inflation dropped to 21.88%, a modest 0.34 percentage point decline, but the first sign that the worst might be over. By August, the drop accelerated to 20.12%, down 1.76 points. September brought 18.02%, another 2.10-point plunge. October delivered 16.05%, the lowest rate since March 2022. And now November’s 14.45% confirms this isn’t a blip. It’s a trend.

The most significant change has been in food inflation. From a peak above 40% in late 2024, food inflation has crashed to just 11.08% in November. This matters enormously for digital lenders because food was the primary driver of survival borrowing.

Read also: From 18.02% to 16.05%: Can fintech companies ride Nigeria’s inflation wave?

When Nigerians were spending 60-70% of their income on food alone, loan repayment became nearly impossible. Now, with food prices stabilising during harvest season and a stronger naira reducing import costs, households have more breathing room.

The National Bureau of Statistics reports that staple items like beans, garri, tomatoes, beef, and rice have shown month-on-month price decreases. This isn’t just statistical noise, it’s real relief felt in markets across Lagos, Abuja, and beyond.

How inflation is changing digital lending

The implications for digital lending are profound.

First, the nature of borrowing is shifting. When inflation was above 20%, loans were a last resort for survival. At 14.45%, borrowing can return to its more productive purpose: financing business expansion, purchasing inventory, or investing in education.

Second, repayment capacity is improving. With prices stabilising, borrowers have more disposable income left after covering essentials. The difference between 22% and 14% inflation might sound abstract, but for a household earning ₦150,000 monthly, it’s the difference between having ₦10,000 or ₦30,000 left after basic expenses. This is money that can go toward loan repayment.

Third, risk models are becoming more reliable. During periods of hyperinflation, credit scoring breaks down because everyone becomes a high-risk borrower regardless of their actual financial behaviour. As inflation stabilises, lenders can better distinguish between creditworthy and risky customers.

But the digital lending industry isn’t out of the woods yet. The Central Bank of Nigeria has held its monetary policy rate at 27%, making borrowing still expensive for most Nigerians. Until the CBN begins cutting rates, which likely won’t happen until inflation shows sustained stability below 15%, the cost of loans remains prohibitive for many potential borrowers.

FILE PHOTO: A man counts Nigerian naira notes in a marketplace as people struggle with the economic hardship and cashflow problems ahead of Nigeria’s Presidential elections, in Yola, Nigeria, February 22, 2023. REUTERS/Esa Alexander/File Photo

Additionally, new regulations are squeezing margins. The Digital and Electronic Lending Operations Network (DEON) Consumer Lending Regulations, which took effect in July 2025, have imposed strict compliance requirements. Industry estimates suggest compliance and legal spending now consume close to 7% of operating costs for digital lenders, more than double the 2022 level.

The sector has also grown crowded. The number of approved digital lenders surged 166% to 461 by August 2025, up from 173 in April 2023. With improving conditions, consolidation seems inevitable as stronger players acquire struggling competitors.

Looking ahead to 2026

If inflation continues its downward trajectory and the CBN begins cutting rates in early 2026, Nigeria’s digital lending industry could finally transition from crisis management to sustainable growth.

The six-month drop from 22% to 14% has created the foundation. Now, lenders are waiting to see if the structure they built on it can actually hold.