Digital lending no longer a ‘side hustle’ as FCCPC tightens regulation

The digital lending industry in Nigeria is facing fresh scrutiny as the Federal Competition and Consumer Protection Commission (FCCPC) introduces a new set of rules that will fundamentally reshape the market.

The Commission, through its Digital, Electronic, Online, or Non-Traditional Consumer Lending Regulations, 2025, has announced it will begin monitoring interest rates charged by loan apps to ensure they are not exploitative.

The move follows years of complaints by Nigerians who say they are burdened by exorbitant rates, with some borrowers paying nearly triple the original loan amount. In one instance cited, a borrower who took N30,000 was expected to repay N45,00 over one week.

“The Commission shall periodically monitor interest rates for services of consumer lending, and ensure rates are not exploitative and inimical to consumer interest,” the FCCPC said in its new regulation, citing Section 163 of the Act.

While consumers welcome the regulation, digital lenders are pushing back. They argue that interest rates are determined by the cost of funds, credit risks, and operational expenses, not arbitrary choices.

“The interest rate is determined by credit risk, market risk, and cost of funds. Unless the authorities are planning to give us funds to operate and drive financial inclusion, I don’t know how this will work,” said Mr. Gbemi Adelekan, lresident of the Money Lenders Association (MLA).

Many digital lenders do not hold deposits like banks and rely on borrowed funds from financial institutions. According to Adelekan, this dependence, coupled with lending to high-risk borrowers without steady incomes, pushes rates higher than traditional bank loans.

Despite his reservations, Adelekan commended parts of the regulation, especially provisions that ban loan apps from accessing borrowers’ contacts, pictures, and personal files. This, he said, would help eliminate harassment and defamation practices that have stained the industry’s reputation.

“It is a good step in the right direction. This will force more lenders to use the credit bureau and bring transparency to the system,” he said.

The FCCPC’s rules also mandate lenders to state loan conditions clearly, including tenor, interest rates, and repayment schedules.

Digital lending in Nigeria grew rapidly over the past decade, serving millions of people excluded from traditional banking. By May 2025, the FCCPC said 425 loan apps had been registered, following earlier frameworks introduced in 2022 to sanitize the space.

Yet, harassment of borrowers, hidden charges, and unethical recovery methods remain widespread. Under the new rules, offenders face tough sanctions, including fines of up to N50 million for individuals, N100 million for companies, or one percent of their annual turnover, whichever is higher.

While consumers may cheer tighter regulation, lenders warn that overregulation could stifle innovation and exclude risky borrowers. Still, digital lending has matured into a mainstream component of Nigeria’s financial system, and the FCCPC is determined to hold players accountable.

Royal Ibeh

Royal Ibeh is a senior journalist with years of experience reporting on Nigeria’s technology and health sectors. She currently covers the Technology and Health beats for BusinessDay newspaper, where she writes in-depth stories on digital innovation, telecom infrastructure, healthcare systems, and public health policies.

Source: Businessday.ng | Read Full Story…