Unregulated greed and loose oversight fueling the emergence of exploitative online loan providers in Nigeria

In a bid to curb the excesses of digital lenders, the Nigerian government has introduced stricter regulations to enforce ethical practices and penalise abusive recovery methods. This comes after a more proactive approach by Kenyan regulators, who put a new law in place last December to curtail digital lenders' practices.

Digital lenders in Nigeria, such as Soko Loan, LCash, and 9Jacash, now handle debt collection under this newly tightened regulatory framework. The Federal Competition and Consumer Protection Commission (FCCPC) introduced the Digital, Electronic, Online, or Non-Traditional Consumer Lending Regulations, 2025.

These regulations require lenders to follow ethical debt recovery procedures, avoid harassment or public shaming, and disclose all fees transparently.

Key measures impacting debt collection and addressing unethical practices include:

Strict licensing and compliance requirements: Lenders must register, pay licensing fees, and renew their approvals every three years. They have 90 days from the new regulations’ release to comply.
Prohibition of unsolicited marketing and aggressive debt collection: The rules explicitly ban tactics like harassment, intimidation, and unauthorised public exposure of defaulters.
Data protection and consumer rights: Lenders must comply with data privacy laws, maintain borrower confidentiality, and share data with regulatory authorities upon request within 48 hours.
Heavy penalties for violations: Companies face fines up to ₦100 million or 1% of turnover, with individual executives liable for ₦50 million fines and up to five years' ban from the industry for unethical practices.
Ongoing regulatory monitoring: The FCCPC actively monitors interest rates, fee disclosures, and recovery practices. Delisting and app bans target violators, enhancing consumer protection.
Public awareness and financial literacy efforts: Regulators promote consumer education to empower borrowers to recognise fair lending and avoid predatory lenders.

While specific lender-by-lender operational details for Soko Loan, LCash, and 9Jacash are not detailed in available public sources, all digital lenders in Nigeria must now operate within this robust regulatory regime to avoid sanctions and ensure ethical debt collection. This framework marks a significant step to curb the previously widespread aggressive and unethical recovery practices linked to some digital lending apps.

The new regulations have been welcomed by many, including Ebuka Anyaeji, who has been receiving threatening messages and calls about being a guarantor to a debtor on the run. He wonders why digital lenders use shaming tactics and whether this trend will continue unchecked.

The shift towards digital lending started in 2020, with commercial banks offering instant loan products without collateral. This was driven by a new directive by the Central Bank of Nigeria (CBN) to increase the Loan-Deposit Ratio (LDR) of commercial banks. However, unlike digital lenders, commercial banks can absorb losses from high repayment default rates due to their profit margins.

Before, loans were primarily issued by traditional banks with collateral or guarantors. If all efforts to recover the debt fail, traditional banks would revert to possessing the item used as collateral. In the case of loan default, traditional banks would run credit checks, contact the account relationship manager, guarantors, and referees.

The amounts of money owed are surprisingly low, around ₦10,000 ($17.8) or ₦30,000 ($53.6). Julial Flosbach, CEO of BFree, believes that assessing the new financial abilities of a customer and offering new repayment plans can increase the repayment rates from defaulting customers.

In October, Google took down a number of predatory loan apps from its Play Store for violating its policies. The increased LDR required banks to issue more loans to individuals and businesses, with penalties for not meeting the targets. This led to the rise of digital lenders like Carbon, Renmoney, and Branch, as Nigerian banks preferred to lend to businesses.

The driver of this change was a new directive by the Central Bank of Nigeria (CBN) to increase the Loan-Deposit Ratio (LDR) of commercial banks. The pace of response from Nigerian regulators to curb the excesses of digital lenders is slower compared to Kenya, where a new law was put in place in December to curtail digital lenders' practices.

[1] FCCPC. (2025). Digital, Electronic, Online, or Non-Traditional Consumer Lending Regulations, 2025. Retrieved from https://fccpc.gov.ng/regulations [2] NITDA. (2021). Digital Lending Guidelines. Retrieved from https://nitda.gov.ng/nitda-fines-soko-lending-company-10-million-naira-for-repeatedly-contacting-a-debtor [3] CBN. (2020). Guidelines on Loan-Deposit Ratio (LDR) Policy for Deposit Money Banks (DMBs). Retrieved from https://www.cbn.gov.ng/guidelines/guideline-on-loan-deposit-ratio-ldr-policy-for-deposit-money-banks-dmbs.aspx [4] Google. (2021). Google Play Store Policies. Retrieved from https://play.google.com/about/play-policies/ [5] NITDA. (2021). Consumer Protection Regulations. Retrieved from https://nitda.gov.ng/consumer-protection-regulations