Unrestrained greed and loose regulations: The origin of exploitative online loan providers in Nigeria
In the rapidly evolving digital lending industry of Nigeria, a series of events has unfolded, highlighting the challenges and reforms shaping this sector.
Google recently removed a number of predatory loan apps from its Play Store for violating their policies, a move that underscores the growing concern over unethical practices in digital lending.
However, the pace of regulatory response in Nigeria has been slower compared to Kenya, where a new law was implemented to curb the excesses of digital lenders. In contrast, the Nigerian landscape has been marked by a more laissez-faire approach, with digital lenders resorting to aggressive methods, including harassment and public shaming, to incentivize repayment and mitigate losses.
Ebuka Anyaeji, a concerned citizen, has been receiving threatening messages and calls about being a guarantor for a debtor on the run. He wonders why digital lenders like Soko Loan, LCash, and 9Jacash use such shaming tactics for debt collection.
In response to these practices, the Federal Competition and Consumer Protection Commission (FCCPC) introduced the Digital, Electronic, Online, or Non-Traditional Consumer Lending Regulations in 2025. These regulations aim to protect borrowers by requiring lenders to clearly disclose loan terms upfront, prohibit harassment, public shaming, and unauthorized recovery practices, and enforce stringent customer complaint resolution timelines.
Lenders who violate these rules face heavy fines—up to ₦50 million for individuals and ₦100 million or 1% of turnover for companies. Moreover, individuals responsible for unethical practices may be barred from running lending businesses for up to five years.
The regulations also mandate proper assessment of borrowers’ repayment capacity before issuing loans to reduce default rates and promote responsible lending. Complaints that are unresolved by lenders within set periods can be escalated directly to the FCCPC, enhancing enforcement and consumer recourse options.
These measures collectively aim to curb unethical practices like shaming in debt recovery and encourage fair, transparent lending practices in Nigeria’s growing digital credit market.
Traditional banking, on the other hand, has a more structured approach to loan repayment. Credit checks are run, account relationship managers vouch for potential borrowers, and guarantors and referees are contacted if necessary. However, commercial banks in Nigeria started offering instant loans without collateral in 2020, driven by a directive from the Central Bank of Nigeria to increase the Loan-Deposit Ratio.
A majority of borrowers default due to job loss, business failure, or health emergencies that change their financial affordability. The rise of digital lenders like Carbon (formerly Paylater), Renmoney, and Branch filled the gap in lending to individuals that was left by Nigerian banks.
The increase in LDR was done to encourage commercial banks to issue more loans to individuals and businesses to stimulate the economy. Commercial banks can afford to offer loans without collateral and make a loss on them due to their high profits.
In conclusion, the digital lending landscape in Nigeria is undergoing significant change, with regulators taking steps to protect borrowers and ensure fair, transparent practices. As Ebuka Anyaeji's experience demonstrates, there is still work to be done to address the use of aggressive debt collection tactics. However, with the introduction of the FCCPC's regulations, there is hope for a more responsible and ethical digital lending market in Nigeria.
Technology has been integrally involved in the digital lending revolution in Nigeria, with numerous mobile-based lending platforms emerging. However, the handling of payments and finance in this industry has raised concerns regarding unethical practices.
The Federal Competition and Consumer Protection Commission (FCCPC) introduced regulations in 2025 to address such issues, focusing on transparency, prohibiting harassment and shaming, and enforcing strict complaint resolution timelines, moving towards a more responsible and fair digital lending market in Nigeria.
