Nigeria’s digital lending sector is undergoing a major shift as loan companies reduce their reliance on unsecured instant loans and increasingly target borrowers with steady incomes, established credit records and verifiable sources of repayment.
The development is being driven by tighter regulatory requirements introduced by the Federal Competition and Consumer Protection Commission (FCCPC), rising loan defaults and the growing cost of providing and recovering small-value loans.
Under the new regulatory environment, lenders are facing greater restrictions on aggressive and unethical debt recovery practices. This has made it more difficult for digital lenders to extend loans to customers whose ability to repay cannot be properly established.
As a result, several lenders are moving towards structured instalment loans, longer repayment periods and business financing, where repayments can be tied to identifiable income or verifiable business cash flows.
Speaking on the development, the Chief Executive Officer of KwikPay Credit and President of the Money Lenders Association, Gbemi Adelekan, said the industry was gradually moving away from unsecured nano loans because of the high default rate associated with them.
According to him, some digital lenders are now offering more structured loans with longer tenures and repayment arrangements linked to borrowers’ income.
He added that lenders were paying greater attention to business customers with verifiable cash flows and clear financial transaction histories.
An executive of a digital lending company, who spoke anonymously, also confirmed that the company had reduced its exposure to unsecured lending.
The executive said lenders were becoming more cautious because borrowers who default could no longer be subjected to unethical recovery methods under the current regulatory framework.
The official explained that although a lender could blacklist a defaulter, doing so would not necessarily guarantee recovery of the money owed.
THE CHANGING ECONOMICS OF SMALL LOANS
The difficulties facing digital lenders are not limited to regulation and loan defaults.
According to the Chief Executive Officer of Sycamore, Babatunde Akin Moses, the cost of originating, assessing, monitoring and recovering small loans has also made the nano-lending model increasingly difficult to sustain.
He explained that lending a large amount to one customer could be significantly cheaper to manage than distributing the same amount among hundreds of small borrowers.
For instance, a lender giving out N1 million to one customer would only need to assess and monitor one borrower. However, distributing the same N1 million in N5,000 loans would require managing 200 separate customers.
Each borrower would have to be onboarded, assessed, monitored and followed up for repayment, increasing operational expenses.
Moses said the situation had been further complicated by fraud, difficulties in recovering loans, funding costs, regulatory requirements and changing customer behaviour.
However, he noted that there was still strong demand for small, short-term loans, particularly among Nigerians who have limited access to traditional financial institutions.
DEMAND FOR DIGITAL LOANS CONTINUES TO RISE
The shift in lending practices comes at a time when demand for digital credit remains high, largely due to pressure on household incomes and the rising cost of living.
Adelekan said loan applications had increased as Nigerians increasingly turned to short-term credit to supplement their income and meet financial obligations.
At the same time, stricter FCCPC enforcement has significantly changed the way lenders recover outstanding loans.
Adelekan said cases of harassment and other unethical recovery practices had reduced considerably as the Commission stepped up enforcement of its regulations.
He also noted that unregistered lenders were finding it increasingly difficult to operate through mainstream digital platforms because app stores and payment platforms now enforce regulatory requirements for lending businesses.
REGISTERED LOAN APPS RISE TO 525
The FCCPC’s regulatory push has also resulted in a significant increase in the number of registered digital lenders in Nigeria.
Checks by Nairametrics show that 525 digital lending companies have now been fully registered with the FCCPC, while another 33 lenders have received registration waivers because they are already licensed by the Central Bank of Nigeria.
Because many of the registered companies operate multiple loan applications, more than 1,000 loan apps are now under the FCCPC’s regulatory watch.
The Commission also has 112 loan apps on its watchlist, while 54 apps have been removed from the Google Play Store for violating regulatory requirements.
WHAT THE NEW RULES MEAN
The changes are linked to the FCCPC’s Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations, 2025, commonly known as the DEON Regulations.
The regulations took effect on July 21, 2025, following concerns over exploitative lending practices, privacy violations, harassment and abusive debt recovery methods in Nigeria’s digital lending industry.
Their implementation was temporarily disrupted by a legal challenge filed by the Wireless Application Service Providers Association of Nigeria (WASPAN).
However, the legal dispute ended on July 20, 2026, when Justice Allagoa dismissed WASPAN’s suit against the FCCPC and upheld the validity of the regulations.
The court also discharged the interim order that had previously prevented the Commission from implementing and enforcing the rules.
Following the judgment, the FCCPC announced the immediate resumption of enforcement.
With the regulations now firmly in effect, digital lenders are increasingly being forced to rethink the traditional instant-loan model and focus on borrowers whose income and repayment capacity can be verified.
