Digital lenders in Nigeria are expressing significant concern over new regulations introduced by the Federal Competition and Consumer Protection Commission (FCCPC) that empower the agency to monitor and curb exploitative interest rates.
The Digital, Electronic, Online, or Non-Traditional Consumer Lending Regulations, 2025, allow the FCCPC to periodically review lending rates to ensure they are not harmful to consumers, citing Section 163 of its Act as the basis for this authority.
However, this provision has been met with strong opposition from industry players. Lenders argue that interest rates are not arbitrarily set but are determined by fundamental factors such as the cost of funds, credit risk, and market risk.
Mr. Gbemi Adelekan, President of the Money Lenders Association (MLA), emphasised that this aspect of the regulation could disrupt operations in what he describes as a “highly risky digital lending market.” He stated, “Unless the authorities are planning to give us funds to operate and drive financial inclusion, I don’t know how this will work”.
The FCCPC’s move comes in response to long-standing complaints from Nigerian borrowers about exorbitant interest rates charged by loan apps. For instance, one customer was offered a loan of ₦2.5 million but required to repay ₦268,230 monthly for 24 months, totalling ₦6.4 million—an effective annual interest rate of nearly 200%.
Despite such high costs, many Nigerians continue to rely on these platforms for quick access to credit due to limited alternatives.
Digital lenders defend their rates by highlighting their operational challenges. Unlike traditional banks, many loan apps cannot accept deposits and must borrow funds from financial institutions at high costs. Additionally, they primarily serve high-risk, low-income borrowers without stable income sources, which increases the likelihood of defaults.
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While lenders oppose interest rate monitoring, they support other aspects of the new regulations, such as prohibitions on accessing borrowers’ contact lists and photos—a practice previously used for harassment during debt recovery. They also endorse requirements for clear disclosure of loan terms.
The regulations introduce hefty penalties for non-compliance, including fines of up to ₦50 million for individuals and ₦100 million (or 1% of annual turnover) for companies.
The FCCPC aims to sanitise an industry plagued by unethical practices, but lenders warn that excessive regulation could stifle innovation and reduce credit access for underserved populations. As the debate continues, the future of Nigeria’s digital lending landscape hinges on balancing consumer protection with sustainable business models.
cc: Nairametric
