According to the World Bank, Credit Infrastructure, which is the first key pillar, refers to the sets of laws, institutions, and mechanisms that enable the efficient and secure extension of credit in an economy. This infrastructure is essential for ensuring that credit markets function effectively and it includes several key components such as credit reporting systems, collateral registries, secured transaction laws, insolvency and debt resolution framework and of course, adequate legal and regulatory frameworks. A well-established credit infrastructure is the bedrock upon which consumer credit markets thrive, by providing the necessary environment for lenders and borrowers to engage in secure, efficient, and transparent transactions.

Accordingly, the Nigerian Consumer Credit Corporation is dedicated to strengthening Nigeria’s consumer credit ecosystem by collaborating with financial institutions, credit bureaus, fintech companies, and regulatory bodies to expand credit reporting coverage. This helps to increase the number of consumers included in credit databases and while also improving the quality of credit information. Additionally, the Corporation is committed to working with the Central Bank of Nigeria to enhance the use of the National Collateral Registry, enforcement of the Global Standing Instruction Framework and modernising secured transaction laws. This effort will ensure broader access to credit on favorable terms to qualified Nigerian citizens.

The Nigerian Consumer Credit Corporation will also work with policymakers, credit bureaus and industry bodies towards integrating our National Identity Management system into our consumer credit infrastructures, and helping in the strengthening of Nigeria’s laws to better support the consumer credit market, streamlining debt resolution processes, ensuring effective enforcement of credit contracts, protecting the rights of creditors and borrowers, and ensuring that financial institutions and borrowers operate with transparency and responsibility.

In pursuing this journey of rejuvenating the Nigerian economic growth through consumer credit, there is also a need for cultural re-orientation. This is another critical pillar within the Corporation’s focus. As many experts are aware, one of the most pressing challenges in expanding consumer credit is the need to transform the cultural mindset of the populace towards understanding and embracing responsible lending and borrowing practices. Historically, there has been a perception among some consumers that consumer credit is some type of a government social welfare program, with minimal or zero obligation to repay.

This misconception not only jeopardises the sustainability of the consumer credit system but also hinders its potential to drive genuine economic empowerment and growth. To address this, the Nigerian Consumer Credit Corporation is dedicated to implementing comprehensive financial literacy programs aimed at educating consumers on the importance of creditworthiness, the benefits of maintaining a strong credit history, and the critical responsibility that comes with borrowing. By fostering a culture of responsible borrowing, we can help more Nigerians to recognize that consumer credit is a powerful tool for enhancing the quality of life—provided it is used judiciously and with a steadfast commitment to honoring repayment obligations.

The importance of viewing consumer credit as a mutually beneficial agreement thereby building trust within the system and securing its long-term sustainability needs to be emphasized. Through these initiatives, the Corporation seeks to transform the cultural perception of consumer credit in Nigeria, while positioning it as a cornerstone of economic opportunity and financial inclusion, rather than a temporary welfare hand-out solution or an entitlement programme.

With the first two pillars cleared, the issue of Capital, as the third key pillar, comes in vividly. The lack of low-cost capital, short loan tenors, and high interest rates continue to hinder the expansion of consumer credit in Nigeria, these significant challenges restrict credit availability and affordability for many Nigerians. At the Nigerian Consumer Credit Corporation, we will provide wholesale lending to expand the reach of consumer credit across the country. By ensuring that regulated and registered retail lenders especially those with limited access to low-cost funding e.g. microfinance banks, fintech, finance house etc. have the necessary capital, to make consumer credit more accessible, particularly to underserved and low-income households.

While public budget allocations will be instrumental in jumpstarting wholesale lending initiatives, I understand that there are inherent limitations to relying on this approach as a medium and long-term solution. Public funds are finite and must be allocated across various competing priorities, such as infrastructure, healthcare, and education. Over-reliance on government budgets for wholesale lending can strain public finances and limit the scope of consumer credit expansion which has a potential market size of over N150 trillion (over $100b).

Moreover, public budget allocations are often subject to economic fluctuations, which can introduce uncertainty and volatility into the wholesale lending market. This makes it challenging to plan and execute long-term strategies for consumer credit expansion. Recognizing these limitations, we view public budget support as a necessary but temporary measure. It serves as a crucial bridge, enabling us to build momentum in the consumer credit market and lay the foundation for more sustainable sources of wholesale capital.

The strategy is to transition from full reliance on public budgets to attracting local and international wholesale capital by offering guarantees that mitigate lending risks. These guarantees will make large financial institutions locally and internationally to provide wholesale funding to retail and smaller financial institutions securely and at lower rates that can make investments in Nigeria’s consumer credit market more secure and appealing, and thereby encouraging the influx of capital needed to scale the sector. Additionally, the Corporation will leverage innovative financial instruments, such as credit-linked notes and the securitisation of consumer loans, to enhance the liquidity of the consumer credit market. By converting consumer loans into tradable securities, we can create a more dynamic and flexible market, allowing for easier capital movement.

However, it is crucial to expand consumer credit with a clear understanding of its broader economic implications. A significant risk associated with exponential growth in consumer credit is the potential to inadvertently fuel mass importation of foreign goods. When consumer credit is predominantly used to finance the purchase of imported products, it can exacerbate Nigeria’s trade deficit, weaken the naira, and strain the local economy. This import-driven consumption not only undermines the growth of local industries but also contributes to inflationary pressures, as increased demand for foreign goods can drive up prices and reduce the purchasing power of consumers. In contrast, consumer credit that is directed towards the purchase of locally produced goods can stimulate domestic production, help achieve economies of scale, and ultimately contribute to price stability by increasing the supply of goods. This type of credit-driven production can help mitigate inflation, supporting a more stable and sustainable economy.

To avoid the pitfalls of import-fueled inflation and to maximise the benefits of consumer credit, the Nigerian Consumer Credit Corporation is committed to guiding the expansion of consumer credit to align with the President’s “Buy Made-in-Nigeria” campaign. The Nigerian Consumer Credit Corporation will play a pivotal role by providing credit guarantees to financial institutions, thereby reducing the risk for lenders and encouraging them to extend credit for the purchase of locally produced goods and services.

By focusing on supporting industries that manufacture within Nigeria, the Corporation aims to create a virtuous cycle where increased consumer demand leads to higher production volumes, achieving economies of scale and ultimately resulting in lower prices for consumers. This approach not only promotes economic self-sufficiency but also strengthens the local manufacturing sector, enhancing its competitiveness both domestically and internationally.

All said, the Nigerian Consumer Credit Corporation’s capital and guarantees will be critical in ensuring that consumer credit is channeled toward sectors that are vital to the nation’s economic development. By aligning its credit guarantee initiatives with national industrial revitalisation strategies, the corporation aims to ensure that consumer credit serves as a tool for economic revitalization, empowerment and price stability, rather than becoming a vehicle for inflationary pressures and dependency on foreign products imports. The objective is to establish a balanced and sustainable consumer credit system that supports local industries, enhances the purchasing power of Nigerians, and contributes to the overall economic growth and stability of the country.
Concluded.
Abdul is the Chairman of the Nigerian Consumer Credit Corporation.