Retail lending in Nigeria declined in January 2026 despite a broader rise in consumer credit, raising fresh concerns about whether the growth in household borrowing is actually reaching the small businesses and traders that need working capital the most.
New data from the Central Bank of Nigeria’s January 2026 Economic Report, published this week, presents a divided picture of Nigeria’s credit market — one in which personal loans are expanding rapidly while the retail lending segment that typically supports small-scale commercial activity is shrinking.
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The numbers and what they show
Consumer credit outstanding climbed to N3.81 trillion in January 2026, showing a sustained appetite for household financing despite tighter lending conditions across the banking sector. The CBN report stated that consumer credit increased by 0.79 per cent to N3.81 trillion from N3.78 trillion in the preceding month. The increase in consumer credit was driven solely by the rise in personal loans, which grew by 5.95 per cent to N1.96 trillion from N1.85 trillion and constituted 51.44 per cent of total consumer credit. Retail loans, by contrast, fell by 4.15 per cent to N1.85 trillion from N1.93 trillion, constituting 48.56 per cent of total consumer credit. The divergence highlights a structural pattern in which banks are more comfortable extending salary-backed or digitally assessed personal credit than funding small business operations that carry higher perceived risk.
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What is driving personal loan growth
Despite the slowdown in retail lending, personal loans remained a major driver of household borrowing during the period, supported by rising demand for salary-backed facilities, digital credit, and short-term consumer financing. The continued increase in consumer credit balances suggests Nigerians relied more heavily on borrowing to manage rising living costs and weakening purchasing power. Banks have found it easier to scale personal lending through digital platforms, where payroll data and transaction history can be used to assess creditworthiness quickly and at lower cost than traditional business loan underwriting. This dynamic has accelerated the growth of personal credit while leaving retail business borrowers underserved.
What it means for Nigerian SMEs
The data points to a persistent gap between headline credit growth and the practical financing reality facing most small business owners in Nigeria. Consumer credit rising to N3.81 trillion sounds substantial, but the contraction in retail loans means the credit pool available to market traders, small retailers, and micro-enterprises is actually narrowing. This matters because retail lending, unlike personal salary-backed facilities, is what enables small businesses to stock inventory, meet payroll, and bridge cash flow gaps between sales cycles. The development comes amid elevated interest rates and the apex bank’s tight monetary policy stance aimed at curbing inflation and stabilising the foreign exchange market, conditions that have historically made banks more risk-averse when it comes to lending to smaller enterprises without strong collateral or predictable income streams. Closing this gap will require more than rising aggregate credit figures; it will require deliberate policy action to redirect lending towards the productive, employment-generating segment of Nigeria’s economy.
