Category: Credit policy

Credit policy is one of those things that quietly determines whether a lending business survives or slowly destroys itself. It shapes who gets access to credit, how risk is priced, how losses are contained, and how responsibly an institution behaves when things don’t go according to plan. I’ve spent enough time around lenders, fintechs, and policymakers to know that credit policy is rarely just a technical document sitting in a compliance folder. When it is taken seriously, it becomes the discipline that guides everything from underwriting to collections.

In this category, I curate and write authoritative content on credit policy design, governance, and responsible lending across global financial systems. I pay particular attention to how these ideas translate into real markets where regulation, infrastructure, and consumer realities are constantly evolving. That means looking at how lenders structure policies, how boards think about risk oversight, and how institutions balance growth with responsible lending obligations.

You’ll also find my own views on credit as a tool for economic development. Loans can expand opportunity, support businesses, and drive financial inclusion when they are designed properly. They can also create unnecessary distress when underwriting is careless or incentives are misaligned. I’m interested in the systems, technologies, and governance frameworks that help credit work the way it should.

A lot of the writing here also explores how modern lending infrastructure is changing what credit operations can look like. Better data, smarter underwriting models, and improved servicing platforms are making it possible to extend credit more efficiently and responsibly. When those pieces come together properly, credit stops being slow and rigid and starts doing what it was always meant to do: move quickly, reach the right people, and power real economic activity.

Releasing telco data for underwriting is better for the poor

Consent-based telco data could become the first credible risk signal for people without formal credit histories. If lenders can access phone usage patterns through open APIs, with explicit customer permission, auditability, and privacy controls, millions of invisible borrowers may finally get a fair shot at small-ticket credit.

If you spend enough time around lenders trying to serve everyday people in developing countries, you’ll notice that their biggest frustration is not even defaults. Yes, defaults hurt, but most of them accept that as part of the business. What keeps them stuck is more basic. They struggle to make confident credit decisions because, for a large part of the population, there is nothing reliable to base those decisions on.

The chicken-and-egg nature of this problem is something I’ve been thinking about for a long time. I wrote a piece on it last year, and even before that, I had co-authored a 2021 paper on using open APIs to drive financial inclusion through credit scoring built on telecoms data. The contradiction is obvious the moment you state it plainly. You need credit history to access credit, but you can only build credit history by accessing credit.

So if you’ve never had a formal loan, never held a bank account long enough for it to mean something, never interacted with any financial institution in a way that left a data trail, where does your story begin? For most people trying to enter the formal lending world, it doesn’t begin anywhere. You don’t exist as a credit subject, which is a polite way of saying that nobody is going to give you money regardless of how reliably you’ve managed every dollar that has ever passed through your hands.

So credit providers end up guessing, tightening, or stepping away entirely. None of those outcomes expands the market.

So what has worked in Africa, when so many other things haven’t?

Africa has seen a lot of well-meaning interventions that arrived with serious fanfare and left very quietly. Banking penetration has been a decades-long project with results that remain modest across many markets. Credit bureaus exist, but their coverage is thin because you cannot bureau-fy people who have never been inside the system in the first place. Identification infrastructure is still catching up in most places. But if you ask what technology has reached the population across the continent, there is one practical answer, and it’s the mobile phone.

Phones are everywhere, and I don’t say that loosely. The average Nigerian is carrying two, three, sometimes four SIM lines simultaneously, and that pattern repeats itself across the continent in ways that have consistently surprised economists and policy people who expected adoption to crawl.

What happened instead is that Africans skipped entire layers of infrastructure that the rest of the world spent decades carefully constructing and went straight to mobile. They use their phones for everything, communication, money transfers, business coordination, accessing information, entertainment, maintaining social networks that would otherwise require physical proximity. For most people at the base of the pyramid, the phone is the technology of their entire connected existence, and they have embraced it with an enthusiasm that no government awareness campaign could have manufactured or sustained.

There are even academic papers now making the case that the way a person uses their phone is predictive of their creditworthiness, and the logic holds up. The patterns are there in the data: call frequency, network breadth, airtime recharge behavior, mobile money activity, data usage consistency over time. None of these data points were designed with lending in mind, but together they show patterns of behavioral reliability and economic rhythm that can give lenders a first risk signal where a credit file does not exist. The data is already being generated every single day, sitting with the telcos, produced by the hundreds of millions of people who have no credit score but active SIM cards and consistent patterns of behavior that a decent model can read.

Why NCC can’t solve this alone, and why GSMA should care

The Nigerian Communications Commission has a mandate, and financial inclusion sits outside the center of it, and that’s not a criticism of the NCC so much as a simple observation about institutional scope and design. The GSMA, on the other hand, operates at a continental level and has always had financial inclusion threaded through its thinking about what mobile’s social role actually is and should be. That puts the GSMA in a position to shape something useful across multiple markets.

I’m proposing a consent-based framework, most likely built around open APIs, where customers can authorize access to their phone usage history specifically for the purpose of credit assessment. Consent here has to carry real weight. That means consent cannot just be a checkbox buried inside a loan flow. This framework has nothing to do with telcos quietly selling behavioral data to lenders or anyone having access to anyone’s information without a clear, traceable, customer-triggered permission event tied to a specific loan request. The customer controls access. They open it when they want a loan, they see exactly who is asking for access and what they’re asking for, and the telco releases the data under conditions that make it useful for underwriting without turning it into something that can be repurposed for surveillance or profiling beyond the stated use case.

The economics of this model are straightforward, and that cleanliness is part of why I think it has real legs. The consumer doesn’t pay out of pocket, which matters when you’re talking about people for whom every transaction cost is a real consideration. They’re already the asset in the sense that their data is what makes the whole thing function, but they receive value back in the form of credit access they couldn’t get through any other channel.

The lender pays for the data, which is reasonable because they’re acquiring a risk assessment capability they currently don’t have and need. The telco monetizes an asset they’re already sitting on, generated as a byproduct of their existing operations, without doing anything extractive or exploitative to produce it. Each party gets something it wants and contributes something the others need. That is why the model can sustain itself without requiring ongoing subsidies or regulatory mandates to keep it alive.

The model also needs a customer-visible record. Every time a lender pulls a customer’s telco data, the customer should receive a real-time notification telling them exactly what was accessed, when, and by whom. That notification architecture isn’t technically complicated to build into the system, and it does work beyond the mechanics of data access. It helps build trust by making customers feel like informed participants rather than data sources that get mined without their knowledge. Without that distinction, customers may eventually see the whole thing as another data grab.

MTN killing Xtratime shows how fragile small-ticket credit still is

MTN recently stopped giving out Xtratime loans, and the reasons sit somewhere in the space between FCCPC regulatory pressure and compliance positioning that I won’t pretend to fully judge from where I’m sitting. But every time a major credit provider, whether it’s a bank, a telco, or anyone else operating at that scale in the small-ticket credit market, decides to exit: the people who absorb the damage are usually the people at the bottom of the pyramid.

There’s that saying about when two elephants fight, it is the grass that suffers, and it applies here with a precision that should make anyone in financial services uncomfortable. The regulatory arguments are real, compliance concerns are legitimate and the internal risk calculations that led to the decision are probably defensible on paper. Unfortunately, none of that changes the outcome on the ground for millions of people who are borrowing airtime and data to cover the gap between today and whenever their next income cycle lands.

Those people don’t get a press release explaining the regulatory rationale. Instead, they get a closed door slam shut in their faces, and then they turn to the next available option, which is very rarely another regulated institution with reasonable rates and consumer protection obligations. It’s a moneylender with very different incentives, or a family network already under its own financial strain, or simply going without and managing the consequences of that.

Or worse still, forced to consider unethical alternatives.

The telco data model I’m describing is partly a direct response to this kind of fragility in the system. If the underwriting infrastructure for small-ticket credit is better, more distributed across multiple lenders rather than concentrated in a few major players, then the system becomes more resilient to these kinds of exits. One major player pulling back doesn’t collapse the whole market because the capability to assess creditworthiness for people without formal credit files is embedded in the infrastructure itself rather than sitting inside any single institution’s proprietary system.

Walking through how this actually works when someone needs a loan

Here is how it works when someone needs a loan.

Someone needs a loan, maybe it’s $10, maybe it’s $100, and the amount doesn’t change how the process works. They approach a lender. The lender, rather than asking for a credit score that doesn’t exist or collateral that the borrower doesn’t have, instead asks for consent to access six months of phone usage data through the telco. The customer gives that consent on their device through the available interface, a push notification, an in-app prompt, and the telco generates a one-time, purpose-limited data package in direct response to that consent event.

That package needs specific properties for privacy and trust. It is genuinely single-use, meaning the lender cannot pull the same data again without initiating a completely fresh consent process with the customer.

The phone numbers that appear within the dataset are not exposed raw. They are hashed or encrypted with consistent values across the dataset, and even then the lender should only receive the features needed for underwriting. The lender can see behavioral patterns, such as whether this person regularly communicates with a stable network of contacts or whether their call behavior is consistent and not erratic, without receiving the actual phone numbers in that person’s communication history. The lender looks at the timing patterns, the usage consistency, the behavioral signals that the model surfaces, makes a credit decision, and either extends the loan or declines.

When the customer comes back for another loan later, the process starts fresh with a new consent event and a new one-time data pull. Nothing accumulates on the lender’s side without an explicit new permission, and the customer’s data doesn’t sit in a lender’s database being used for purposes they never agreed to.

One hard part in this model is USSD. Many of the people this whole framework is designed to reach still rely on USSD for their phone interactions because smartphone penetration, while growing fast, hasn’t reached everyone yet. Building a clear consent flow over USSD is technically harder than building it through a smartphone interface, and any implementation that only works smoothly for smartphone users has already left out a portion of the exact population it was supposed to serve. That is solvable, but it requires deliberate attention during design, not bolted on after the smartphone version is built.

Telco data can become the first credit file

The data exists, and the need exists. The technology to connect them in a consent-based way that protects customers and still makes commercial sense also exists. What has been missing is an institution with enough reach to build the framework, and the strongest candidate for that framework is an organization like the GSMA that operates simultaneously across the telco industry and the financial inclusion space without being owned by a single telco or lender.

The people who need credit the most are consistently the ones who have the least documentation of their reliability, and that is where traditional credit systems fail. Telco data doesn’t solve every dimension of that problem, and I’m not suggesting it does. It is not a replacement for credit bureaus. But it addresses the immediate blocker, which is giving lenders a credible signal to assess someone who has never had a formal credit relationship in their life.

When lenders have something credible to look at, some of them will lend. When some of them lend to people who couldn’t access credit before, and those people repay, the data trail from those transactions starts to build the credit history that was missing in the first place. But that repayment history has to become portable, through credit bureaus, open finance rails, or another recognized system. Otherwise, the borrower only graduates inside one lender’s database.

That is the practical value of consented telco data: it can become the first credit file for people who currently have none.

Fraudsters are raping the Nigerian fintech space to death

Rape and financial fraud share a common thread: the silence of victims, often due to shame. In Nigeria, banks and fintechs suffer a N12 billion loss to fraud, yet remain silent, fearing the stigma. This silence hampers justice and perpetuates the cycle of crime.

Rape is the absolutely worst thing that could happen to anyone. It’s so horrible that if rapists are caught and sentenced to death, many people won’t even bat an eye and simply believe it’s justified. It’s so horrible that some rape victims commit suicide.

But if it’s such a terrible offense with severe consequences, why do rapists often get away without consequences? The answer is pretty straightforward, albeit very sad: Most rape victims would rather keep mum than expose these bastards.

Naturally, the next question could be why are victims so reluctant to step forward to the extent that many accept that they may never get justice but stay silent all the same?

The answer to this, much like the former, is also quite straightforward.

Shame.

Nigerian banks and fintechs have been shamed into a N12 billion silence

It’s no secret that victims are often shamed into silence and even merely the thought of being shamed is enough of a deterrent for those who may want to speak up. Many times, people even forget about the guilty party and focus on grasping at straws to blame the victim and try to convince them that they were complicit in their attack.

Similarly, shame is what makes it difficult for financial providers whose businesses have been defrauded to speak up even when they can get justice from the authorities.

Would you believe that since the start of the year, there has been a systematic rape of banks and fintech? I’ve personally tallied ~N12 billion lost to frauds and hack. Every bank and fintech hit has been groaning in silence but no one is ready to speak up.

And I’m not just talking about small or new banks, I’m talking about from the big 5 banks all the way down to the smallest ones; fintechs included. Business Day recently mentioned Fidelity, Access Bank, and others who have lost billions to fraud over the last few months.

The discussions about fraud are happening behind closed doors, Telegram channels, WhatsApp groups and the groans are growing louder but still, no one is ready to break this costly silence.

And that, fellow Nigeria, is what the fraudsters are banking on.

Why is fraud running so rampant?

A major cause for concern is sloppy APIs and weak security infrastructure that allows bad actors to gain access to financial systems and move money out. However, despite the more sophisticated systems and security measures with the large banks, people are often the weak links in the system.

Generally, humans will be careless but it also happens that bank staff are bribed to bring in compromised devices to work, etc. which makes it possible for fraudsters to access the banks’ database externally and use private APIs to perpetuate all sorts of crimes.

Of course, we can’t leave out the fraud committed using debit/credit cards and POS machines. Chargeback fraud is so rife you could write an entire book around it. Chargeback destroyed Union54, a once promising African card processor.

What happens to the stolen funds?

Well, the stolen funds take quite the journey. First, the money is sent to another bank, split and passed through even more banks before it then moves through some certain new generation banks; some of which are foreign-owned.

Nigerian banks protect themselves. When cases of unauthorized transactions are reported, it usually triggers a flurry of emails and calls between the banks and the accounts suspected to be involved are restricted pending further investigation. There’s a legal agreement between banks to do this. Albeit, not sanctioned by CBN.

Unfortunately, the new generation banks and fintechs don’t comply with this rule and so the stolen funds simply disappear. Poof!

What’s the implication if this continues?

The reality is that the traditional commercial banks make enough profit to cover getting hacked by APIs so while we should be concerned about them, they’re not the ones most affected by this menace.

The real problem is with the everyday Nigerian who loses their hard-earned money. If the banks are unable to trace where the money went, there’s nothing they can do and their money is simply gone.

The ability of the financial sector to play its role effectively is rooted in trust. Even the strongest economy will crumble if end users lose faith in the financial system. This is what’s at stake while fraudsters continue to destroy decades of work that the CBN, banks, and fintechs put in to build the system we currently have.

For all its many woes, Nigeria is actually ahead of quite a number of its counterparts in terms of the capabilities in the financial sector; especially with electronic transactions.

Therefore, if Nigerians lose in electronic transactions, that sets us back significantly and all hopes of growing the economy vanish.

By law and regulations, banks and fintechs are required to declare to the CBN whenever there is fraud; either hacks or just the everyday “Nigerian Prince” scenarios. But we have to be pragmatic for a minute here. Remember the shame we spoke about earlier? Well, this is where it comes in. The shame associated with declaring a successful fraud attack to the CBN prevents affected organizations from doing so.

If you have had the misfortune of CBN having you to explain your mistakes, then you would understand while sometimes when you kids get bullied in school, (or even more dastardly, raped) then you would know why no bank sings to the CBN when they are taken advantage of.

To make it worse, when customers hear a bank has been hacked, it immediately reflects poorly on the business and suggests incompetence and an inability to meet expectations.

It’s almost like the fraudsters responsible for these terrible acts don’t even exist at all.

But who is to blame here?

The short answer is everyone!.

Quality of human resources within the banking and fintech ecosystems have taken the hit as every smart one of them has “japa“. Some of us may claim to “love” Naija but the truth is, the best and brightest have gone leaving us at the mercy of digital night marauders.

Poor quality has led to poorer platforms. We now have very powerful APIs and other technical capabilities with sub-par resources to monitor and secure them. We are all dead men walking.

Banks and fintechs are sloppy with their Know Your Customer (KYC) and Customer Due Diligence (CDD). Or how do you explain Adedeji with N100k inflow over 24 months suddenly getting N10m and immediately moving that money out?

Super agents aren’t able to explain how sudden cash flies through some agents as cash and there are no ways to hold anyone accountable.

CBN is also not on top of these fraud issues. They don’t need someone to report themselves to know that all isn’t right with the system.

Enough of victim blaming and shaming.

How do we restore the trust that lines the financial system

We’ve already established that everyone has dropped the ball but irrespective of who’s to blame, this issue must be addressed urgently. If not, once the trust in the system is destroyed, the center wouldn’t hold. Fintechs and digital financial services is one great thing Nigeria does well. It shouldn’t die.

CBN and banks should lead a tougher chargeback regime, similar to what happens with cards, for interbank frauds. This will force every bank to take KYC and CDD seriously.

Any bank on the chain found not to have done proper fraud profiling for transactions should be held responsible for the amount that passed through them. Enough of end-customers holding the bag when everything goes south. Let’s hold banks accountable for a change.

CBN, Banks and NIBSS should make it easier for anyone to report fraud. The current process is broken and doesn’t help anyone. They need to collaborate with the Nigerian Communications Commision (NCC) to make fraud so expensive for fraudsters so they reconsider their career choice.

For instance, once implicated, a fraudster should be banned from all electronic transaction channels from 1 year to forever. Good luck to this individual.

The issue here is consequence management. When the authorities make the consequence for fraud expensive and damning, fraudsters will begin to borrow some sense.

Until then, welcome to the league of the onlookers. Because everyday is like Christmas for these fraudsters while the rest of us are wondering when this comic episode will end.

Tinubu’s student loan plan is great. But there is a better way to do it.

The Student Loans Act is a step forward, but its current setup may fail. Some strategies such as simplifying criteria, involving private banks, and focusing on merit can ensure its success.

The Federal Government of Nigeria recently signed the Student Loans (Access to Higher Education Act, 2023 into law. This is a big step in the right direction of providing affordable credit for all Nigerians. Nigeria can’t grow without credit – that’s a fact.

Only a little over 1% of Nigerians are successfully enrolled in a higher education institution and we can’t pretend not to know that the major barrier to accessing higher education for the majority of Nigerians is simply that they can’t afford it. What the Government has done now is to provide a solution to significantly lower that barrier for indigent Nigerians and empower their future through education, to be more productive members of the society. What’s more? These student loans are interest-free; at least for now.

This is definitely commendable.

However, with the way the student loan scheme is currently set up, it might just be destined for disaster. The strict criteria and paperwork required are quite unrealistic for the less privileged students these loans are targeted at. For instance, to qualify for the loan, applicants need to prove that their household income is less than N500,000 per annum or N47,000 per month. This means bank statements and maybe even tax clearance certificates. Needless to say, this poses a problem for low income households who mostly work low paying blue collar jobs or engage in petty trading and remain outside the formal financial sector.

In addition to this, applicants are required to provide at least two guarantors from a limited list of: a level 12 civil servant, a lawyer with 10 years post-call experience, a judicial officer or a justice of peace. The chances that the poor families run in the same circles with these people are slim to none. Even if these requirements are somehow met, there’s no certainty that the loans will be granted as they are subject to the availability of Government funds. These are some of the concerns with the current student loan plan.

This way will fail. Miserably.

Why is it important to ensure the student loan scheme works?

Student loans will secure the future of Nigeria with talent and allow the economy to grow at a sustainable pace. The impact would be felt within a maximum of four years with the fresh graduates’ entrance into the labor market. The labor market will be set to receive an inflow of better qualified job seekers. There might not be enough jobs right now but there’s equally a shortage of talent in the labor market.

Naturally, a reduction in crime will be expected to follow. Educated students are more likely to get jobs and create value than risk their lives or freedom for crime. Even the rent-seeking activities and the entitlement it breeds amongst our young people will see a decline.

With better education and an accompanying improvement in the standard of living, Nigeria will see a rise in our currently poor human development index (HDI) score.

An uneducated Nigeria in 10 years will be a disaster of epic global level.

Is there a better way this could be done?

This is too good an opportunity to pass up or botch. Here are a few ideas that could be implemented to improve the way the student loans will run:

There should be a student loan financing scheme which students, regardless of their parents’ income, can access as long as they meet the schools’ admission requirements. This way, there is much more focus on the ability and merit of the students rather than their parents’ circumstances. This also means it shouldn’t be limited to the poorest students alone.

This financing can be processed through the universities. The universities, upon acceptance of a qualified candidate, can apply for financing on their behalf. Of course, the universities must also meet a certain standard that assures financiers that the student will receive a quality education that increases their chances for success upon graduation. In view of this, the financing may be restricted to certain courses for which job opportunities are readily available. This helps to manage the risks associated with repayment down the line.

Additionally, transferring the responsibility of financing the loans to the existing private banks takes care of the “disbursement is subject to the availability of funds” clause. Public-private sector partnership can go a long way in ensuring the success of this initiative.

Involving the banks means students may also have the option of securing their admission first and processing the financing through the banks. The only role the Government might play in this is to back the loans; to guarantee the loans in a sense, so the banks can lend confidently.

Essentially, what this is what this could look like: Student Lagbaja gets admitted into ABC university and informs the university he would like to finance his studies via a student loan. He fills out an application for the student loan at the university and the university submits this request to a bank they would have partnered with for this purpose. The university assures the financier that the student is enrolled in an accredited program for a specific duration and they will receive quality academic instruction. Student Lagbaja’s fees are covered by the bank and that’s it. He can go into the world and succeed. And of course, start repaying the loan when due.

What are the benefits of implementing the student loan plan this way?

Let’s get straight into it:

The first benefit is that this way, the loans can be allocated with merit at the heart of the requirements. Enforcing a minimum standard of academic excellence to access the student loans also ensures that only the students with the best future prospects benefit.

The need for guarantors becomes irrelevant and this removes the classist implications of the current requirements of such out -of-reach high-ranking officials as guarantors.

Another benefit of this approach is that students can take responsibility for this process without involving their parents, who may be unable to help because they don’t have the resources or an understanding of what’s required of them.

Finally, a more efficient loan distribution network can be established through the banks. This removes the possibility of the process being held back by Government inefficiency, bureaucratic red tape and corruption.

What’s the assurance that this approach would work better?

It’s quite simple really. Banks are more effective with lending and loan recovery. We can’t forget that the Government already tried student loans in the 1970s and had to abandon the efforts when they couldn’t hold people accountable when it came to repayment.

Universities would also be forced to improve their offerings and facilities to be able to onboard more students who can attend on loan.

The final question to answer after considering all these is perhaps the question of how the Government will ensure the loans are cheap? Interest-free loans start and end with the Government. Incentives such as tax write backs would work quite well here to make lending attractive to the financiers and keep the loans at maybe even single digit interest rates.

I’ll give the current student loan plan an A for effort, but the follow-through is in danger if they decide to go ahead without making adjustments. At a time like this, let’s hope the Government hears the people and acts accordingly.

Without access to credit for everyone, Nigeria can’t hit the growth it wants

Credit changes lives. Access to credit boosts education, entrepreneurship, and economic growth. To unlock Nigeria’s potential, the government must protect lenders and borrowers alike.

Let’s start with a story about Bimpe and Uche. Bimpe, a graduate of Sociology from the University of Lagos, is working an underpaying job with no growth prospects. With a salary of N100,000 and more mouths to feed than she could afford, Bimpe was miserable. She couldn’t continue living that way and she decided to start a business. The thing is, Bimpe is a very talented seamstress with a flair for sassy African fashion you see on Instagram, and you go like “whoa!” She could easily earn a lot focusing on couture full time, but she needs about N800,000 to start. She barely had N5,000 at the end of the month after all necessary expenses. Where would she get N800,000 from?!

She tried to save aggressively but life kept getting in the way and it was nearly impossible. She had nowhere to turn to get a loan that size either. Her numerous but failed efforts to gather the funds she needed made her burnout and less focused at work. She lost her job and had to resort to petty trading, barely making ends meet.

Uche’s story is a little different. Uche didn’t have the opportunity of attending university like Bimpe. However, he did have the opportunity of an apprenticeship with his uncle who owns a logistics business and all Uche wanted was to start his own logistics company after his ‘freedom’. After a couple of years Uche was finally free and then his eyes cleared when he realized he was so focused on learning how to grow his own business that he forgot the ‘seed’ he needs to grow his business isn’t the kind you find easily.

Well, Uche’s seed came in the form of a loan from his cooperative and he bought his first two dispatch bikes for his logistics business. Within 10 years, Uche’s business grew exponentially and he’s now a big man with many delivery bikes, buses and even trucks for nationwide delivery.

Credit saves.

A loan saved Uche. And most likely many others who could only afford to build good lives through the thousands of jobs Uche created through his business. Now imagine if a million Uches got loans like that and built a million successful businesses. Imagine if some other Uches didn’t even have to wait and could get loans to go to school and get good jobs. Enough with the daydreaming, back to reality: Bimpe. Bimpe whose promising life was completely derailed because she couldn’t access a loan or any line of credit.

The fact remains credit completely transforms anything it touches and it’s essential to grow any economy. Without credit, growth is limited; stifled even. Every N1 injected into the economy has the potential to create 10x value. This phenomenon is known as the ‘multiplier effect’.

What is the multiplier effect?

I won’t bore you with the technical jargons; let’s leave that for the economists. For the purpose of my crusade for credit, the gist of it is that for every injection (investments, capital expenditure, etc) into the economy, there’s an amplified ripple effect on the value and income generated within that economy.

Think about this: you’re on your way back home after a long day at work and hunger pangs are flogging you worse than your primary school teacher! A woman selling roasted plantain by the roadside comes to your rescue (not all heroes wear capes, some tie wrapper) and you pay for the goods. You have not only put money in the hands of the roasted plantain seller, you have also put money in the hands of her plantain supplier, who in turn puts money in the hands of the farmer and even the delivery truck driver and offloaders. The list goes on. Everyone makes money. That’s what the multiplier effect is.

So should Nigeria miss out on this potential for prosperity because people don’t have money right away? That’s absurd.

Give them money to build their dreams!

Let’s pump credit into education and reap prosperity for everyone

Only about 1% of Nigerians are in the universities. I’m sure if we were to conduct a study to find out the relationship between the level of education of Nigerians and the poverty rate, we’d discover they are married with three children.

There are a few barriers to getting a quality tertiary education in Nigeria but the highest barrier of all is simply that people can’t afford it so they don’t bother. They focus on providing for themselves and their families instead. The sad truth is that this deprives them, and even their generations to come, of the chance to ever make it out of poverty. The poverty trap didn’t come here to play with anybody.

There’s no denying that the student loan scheme in the US comes with its own wahala. Student loans in the US allow people who would never even have dreamed of a university education to attend some of the best schools in the world. The US’ global leadership is directly correlated to the quality of its education. Go figure!

Nigeria has now followed suit and introduced the Student Loan (Access to Higher Education) Act, 2023. Whether this is practical and sustainable remains to be seen but the idea is definitely welcome. With this, Nigerians can access quality education previously out of reach for so many. This could be pivotal to the quality of life for the beneficiaries’ generations to come.

With these loans, students get access to a good education; if they are focused and graduate with a good grade, they greatly increase their chances of landing a good paying job and living a productive and prosperous life. And guess what? The ability to earn the income they do over their lifetime can be directly traced to their access to credit.

The logic applies too even if the student chooses to start a business after graduating. They create jobs for others, they pay taxes and they have more money for consumption. Those who benefit from the jobs they create also pay taxes and increase their consumption. Rinse. Repeat.

The deal gets even sweeter. Why? Because people with better lives are able to give their children better lives too. The value generated just keeps multiplying. Did I just solve the poverty trap or what??

The simple fact is, no great country has ever emerged without educated minds and the US leads the pack with robust financial support and credit for students. Without Nigerian funding education like our lives depends on it, we wouldn’t get anywhere.

Don’t turn off the money gun just yet: entrepreneurs need loans even more

It just makes sense to give money to people who have the capacity to grow it, doesn’t it?

Say an entrepreneur starts a business with a loan of N5 million. You know what this means for the economy? Jackpot. They create jobs. They purchase materials from suppliers. They pay consumption and corporate taxes.

It doesn’t stop there. The suppliers are also able to create even more jobs with their increased income and every single one of them has to pay taxes to the government too. This same value chain is created even in small businesses. Remember the roasted plantain seller who saved you in traffic earlier? Take even the Uber drivers who take loans or take advantage of hire purchase options to buy a car and pay it off over some time. They’re big boys now o!

The fact is, everytime you give someone money, you empower them to create value. Cash injections end up becoming a powerful creative force to drive value creation in an economy many times over.

Credit. The gift that just keeps on giving.

If credit is so great, who’s hoarding it and why?

The value the economy stands to benefit from accessible and affordable credit is apparent so where’s all the good credit? It’s there but lenders aren’t lending. Why? Because no one is protecting them. We talk so much about borrower protection but if you hear the terrible things borrowers are doing to lenders on a daily basis, you’d quickly offer lenders a box of tissues for their hot tears.

Nigerians take loans and don’t pay back. This discourages lenders and forces them to limit the credit they offer to small ticket loans and high interest rates to account for their risk exposure. The problem here is that these kinds of loans are utterly useless to people who need a substantial cash injection to create significant value.

The government needs to protect lenders too. They can’t expect to be able to meet the credit needs of over 200 million Nigerians alone. Or do they think they can?

Nigeria isn’t the guinea pig and this isn’t an experiment. China did it already

If you want to know how effective credit is in transforming economies, just look at China. Their state-owned enterprises (SEOs) received low interest loans and the economic benefit was massive. With these loans, the SEOs were able to ensure economic stability, trigger substantial economic growth, reduce their unemployment rate and commit to undertaking large-scale infrastructure projects.

These loans came with their own challenges too but answer me this: Is China a superpower or no?

Then that’s that about that.

Let’s even come back home to Nigeria. We’ve had economic miracles borne out of credit as well. Take Dangote and Otedola whom all the kids look up to. Despite hailing from wealth, Dangote took out a loan of N63 billion, inclusive of $75m from IFC, to build the Obajana cement factory. Otedola did the same with a much larger syndicated loan towards Zenon Petroleum and Gas in 2007. Even the telecoms giant, MTN, signed a loan deal for N200 billion just four years ago when it floated its shares on the stock market.

Dear Nigeria, think smart and think fast!

The case is clear for Nigeria.The Government needs to think smart and think fast.

For the Government to take heed and jumpstart the economy, here are a few no-nonsense but simple things they can do immediately:

The government should step in beyond borrower protection and protect lenders as well and encourage them to lend more. Of course, this should be done with recourse to checks that guide lending: ethical interest rates, due process, etc.

The government can create a set of rules, regulated by the CBN that explicitly protects lenders without bureaucratic red tape: instead of lenders and borrowers dragging each other to court, lenders can report defaulters and get cooperation from defaulters’ banks to settle the loan. They should consider giving lenders access to use the global standing instruction (GSI) and putting it to much better use.

For the suggestion above to work, loans can be registered by lenders with a regulatory body and perhaps be given a limit to what can be recovered on loans in default e.g lenders can only recover their principal, with no penalties or interest when a loan goes into default. In the same attitude of transparency, an increase in the interest rate must also be communicated to borrowers and the authorities ahead of time before implementation.This process should be seamless and possibly electronic.

In summary, if the government doesn’t use credit to leverage the economy, the exponential growth we so desperately need will never happen. The best time to start was years ago. The next best time is now.

If your employer won’t give you a staff loan, ditch them!

Access to credit in Nigeria is tough, limiting dreams and necessities. Companies offering staff loans isn’t a luxury, it’s essential for motivation and productivity. If your employer won’t help, it’s time to find one that will.

Your employer is probably demanding your arm, legs, and probably one of your kidneys. All fine and good; aren’t we all family? Not so fast: if they can’t do what families do by giving you a decent access to loans when you need it instead of loan sharks swimming around the murky waters of Nigeria, then maybe time you got another job.

You want to know why? Here we go!

In Africa, and especially Nigeria, we practically save for everything important for our lives. Rent, getting a car, paying school fees. Woe betides you if a nasty medical issue arises. That could be the end of you, or even worse a loved one. After all, we know most of us have poor savings.

Even much more, because there is no access to loans, most Nigerians aren’t able to live their dreams. They can’t go to good schools or send their kids there. They can’t live in their own homes. They can’t get a decent car. They can’t even get a good laptop to start working remotely. Oh right, even if they get a new laptop, what about getting a generator or solar inverter to keep the light on when PHCN strikes?

Getting a loan is one of the fastest ways to get things done. But getting a loan in Nigeria is treacherous. The bank you have been banking with for years is suddenly airing you or making demands even an angel can barely meet. The lending companies, on the other hand, are asking for interest rates so high you don’t know if you would give them your soul instead. You have also heard stories of how lenders disgrace people who were late to make payments.

No wonder less than 2% of Nigerians have access to credit.

Looking at the challenges of getting a credit when needed, it’s even 200% harder if you are working because this would be distracting, and demoralizing. And if you are slacking at work because you’re trying to get a loan, you may as well lose your job. Triple jeopardy!

But you know what, don’t we turn to family when things go awry? Didn’t your boss just say last Friday that you’re family, to justify making you work the weekend?

So why isn’t your company lending you money? 😵

Don’t look confused. Companies offering their staff loans have been a staple of professional life for centuries. It’s almost not a privilege; it’s a right.

You wouldn’t even believe it, most of the middle-class to upper-class people in Nigeria today got a leg up in life with decent or cheap loans from the companies. Ask your CEO, Chairman, founder, etc. how life started for them. None of them was that thrifty or better than you – they all got loans at ridiculous rates to build the beautiful lives everyone admires.

I for one got a cheap mortgage when I worked at United Bank for Africa without any background check. Thanks UBA! My first cars were gotten with zero interest company loans, I got home appliances through partnerships with my employers.

While lending can be scary because many people don’t pay back, companies don’t have the fear that lenders have – they know you 100% in character and in truth; if you don’t pay your loan, you would be sacked. Oh! They even deduct the money from your paycheck and give you the balance.

And it’s not because companies are nice (some are indeed very nice, like Lendsqr). Giving loans to staff keeps them motivated, focused, and happy. Taking away the distractions of hunting for loans at the time of need is super important for productivity and employee happiness.

And what can companies do for you?

In truth, asking for a mortgage in this economy is killing even for the fattest companies. But at the minimum, they can help with personal loans to sort out things you can’t tell HR. They can help with asset finance to get devices, new generators (hoping you have the fuel to power it), inverter and solar panels. They can even help with loans for holidays – send you to far places so that when you come back, you are full of inspiration and deliver amazing quarters.

So what should you do? Just ask your HR for a company today. If she airs you, ask your founder, MD, Chairman, whatever.

If your best friends and family can’t come to your aid when you need them, are they still friends or family? If your employer can’t save your hide when you need them the most, ditch them!