IMPROVING THE INSTITUTIONAL AND LEGAL FRAMEWORKS FOR CONSUMER CREDIT IN NIGERIA FOR THE BENEFIT OF INDIVIDUALS AND SMALL & MEDIUM ENTERPRISES

Abstract

Consumer credit which allows people to purchase goods or services before earning the money to pay for them, is a practice that has long been recognised as an essential tool for stimulating demand and providing comfort to people worldwide. It plays a vital role in developed economies by enabling individuals to access funds for consumption, education and emergencies, thus driving demand, production and economic growth. In Nigeria, the consumer credit landscape has expanded in recent years with increased participation from banks, microfinance institutions and financial technology (fintech) companies. However, the growth in Nigeria is hindered by structural challenges such as high interest rates, fragmented credit information systems, and limited consumer protection. Notably, Nigeria lacks a comprehensive legislative framework specifically addressing consumer credit unlike countries such as the United Kingdom.  This article conducts a critical evaluation of the institutional and legal frameworks applicable to consumer credit in Nigeria with a view to addressing the shortcomings forestalling an effective consumer credit system, making recommendations for the improvement of the institutional and legal framework. The study adopts a doctrinal research approach, drawing on texts in primary and secondary materials, with appropriate references to experience on the subject in some jurisdictions where the consumer credit system has been developed to the benefits of economies and the people. The study finds that while multiple institutions are involved in the provision of credit to individuals and small and medium enterprises, the absence of unified regulation or legislation hampers effectiveness. The paper concludes that a consolidated consumer credit law, improved credit infrastructure and expanded access to credit are required to foster financial inclusion and economic resilience in Nigeria.