Loan Apps Charging Over 300% Interest: CBN Urged to Cap Rates

Digital lending platforms in Nigeria are under fresh scrutiny after the Chairman of the Alliance for Economic Research and Ethics, Dele Oye, warned that some loan apps are charging annualised interest rates exceeding 300 per cent. Oye called on the Central Bank of Nigeria (CBN) to urgently intervene by introducing interest rate caps and strengthening consumer protections.

Borrowers trapped in debt cycles

Oye said the rapid growth of digital lending has provided quick credit for many Nigerians excluded from traditional banking. But he argued that the sector has become a source of financial hardship due to excessive interest rates, hidden charges, and harsh repayment conditions. He described the situation as the “poverty premium”, where those with the least financial resources pay the highest prices for credit, goods, and services.

He cited cases where borrowers received loans of N65,000 but were required to repay N93,000 within just seven days. In some instances, missed repayment deadlines pushed the total debt to as much as N158,000 after penalties and additional charges. Oye warned that such practices leave borrowers trapped in recurring debt, forcing many to take fresh loans simply to settle existing obligations.

Poverty premium beyond lending

Oye argued that low-income Nigerians also pay disproportionately more for everyday necessities. Wealthier households can buy a 50-kilogram bag of rice at a lower cost per kilogram, while poorer families buy food in small daily quantities at significantly higher prices. These frequent purchases expose low-income earners to constant price fluctuations driven by transportation costs and market conditions.

Healthcare is another area where poverty imposes financial penalties. Oye noted that many families delay treatment because they cannot afford routine care, allowing minor illnesses to worsen. A N5,000 malaria test postponed due to financial constraints could eventually result in a N50,000 hospital admission. Housing remains a major challenge, with many renters spending between 40 and 50 per cent of their monthly income on accommodation, according to a report by The Guardian. Landlords demanding one or two years’ rent upfront deepen hardship for low-income households.

Call for regulatory action

Oye urged the CBN and relevant agencies to enforce stricter oversight of digital lending platforms, introduce reasonable interest rate limits, and expand consumer protection measures. He argued that while digital lending improves financial inclusion, the industry must be regulated to prevent vulnerable Nigerians from being trapped in unsustainable debt cycles that entrench poverty.

The Federal Competition and Consumer Protection Commission (FCCPC), working alongside the CBN, has already updated its registry of digital lenders. Over 170 companies are now either fully approved or conditionally approved to operate legally in the country. Borrowers are being urged to deal only with approved loan apps.

For Nigerian consumers, the message is clear: unchecked digital lending is deepening the poverty trap. Without a cap on interest rates, low-income borrowers will continue to pay the highest price for credit, making it harder to break free from debt.