Nigeria strengthens regulatory framework for booming digital lending
August 27th 2025
Digital lending is experiencing strong growth in Africa, as millions of households turn to these solutions to cover their daily needs or finance small businesses. In response to this dynamic, authorities are seeking to better regulate the sector.
In Nigeria, digital lenders now face fines of up to 100 million naira (about $65,000) or 1% of their annual turnover for violations. These penalties are part of new rules set by the Federal Competition and Consumer Protection Commission (FCCPC) in the “Digital, Electronic, Online, or Non-Traditional Consumer Lending Regulations, 2025,” which came into effect on Monday, July 25. The law also includes bans on offending executives, new licensing fees, and enhanced data-sharing obligations with authorities, as well as caps on equity participation.
Nigeria has been strengthening its oversight of the sector since 2022, following years in which lending apps operated with few restrictions, charging high interest rates, and using aggressive collection methods. The new system has significantly expanded the number of licensed providers. Industry sources estimated the number at nearly 400 by July 2025, up from fewer than 120 two years earlier, although official FCCPC publications suggest the figure could be slightly lower.
This crackdown comes as investors continue to bet on the resilience of digital credit. African fintechs attracted between $1.4 billion and $2.5 billion in 2022, before falling back to between $500 million and $800 million in 2023, driven by rising global interest rates and inflation. Lending startups captured about a quarter of this reduced volume. Nigeria secured between $110 million and $150 million, maintaining its position as the continent’s top destination for fintech investment.
Transaction volumes illustrate this appeal. According to market estimates, Nigerian apps will have granted approximately 145 million loans worth $2.1 billion in 2023, with borrowers frequently requesting small amounts of less than $20 to cover living expenses or microenterprise needs. In sub-Saharan Africa, reports attribute 425 million loans worth $8.9 billion to the digital channel that year, though these figures remain industry estimates and not official statistics. Average loan sizes remain very low, but high repeat usage is supporting revenue growth.
Regulatory tightening is changing the economics of operators. Executives report that compliance and legal expenses now absorb nearly 7% of operating costs, more than double the 2022 level. Venture capitalists are also adapting, introducing haircuts or escrow clauses into their contracts for unlicensed companies.
Nigeria isn’t alone in imposing stricter standards. Kenya has licensed only about 126 digital credit providers out of more than 700 applicants since its scheme was launched in 2022. South Africa caps annual percentage rates at 24%. Ghana is finalizing draft regulations, while Uganda and Tanzania have established sandboxes attracting small startups seeking lighter oversight.
Even as compliance costs rise, new opportunities emerge. Analysts estimate that the Nigerian embedded finance market, particularly Buy Now Pay Later (BNPL) at the point of payment, will generate $1.3 billion in 2024 and reach $3.5 billion by 2029. Telecom groups, including MTN and Airtel, are already testing BNPL in neighboring markets. Meanwhile, the open banking framework, launched in 2023 in Nigeria and expected to be fully rolled out this year, is expected to reduce customer acquisition costs and improve credit scoring through expanded access to data.
The combination of stricter regulations and greater access to data is pushing the sector toward consolidation. Well-capitalized lenders, able to absorb compliance burdens while tapping into new revenue streams, are in a strong position. For millions of Nigerians excluded from the traditional banking system, this could mean expanded access to credit within a framework that offers better protection against abuse.
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