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Loan Sharks Ban in Nigeria
They’ve done it. Your village people have done it. They’ve finally gotten you. And they came in the form of money lenders.
You borrowed some money a few weeks ago, but due to the late payment of your salary, your debt is overdue by a few days. Now your service providers have texted everyone on your contact list, claiming that you are a fraud and a thief on the run.
You’ve blamed yourself over and over again. You’ve wondered why you initiated the whole process in the first place. You’re, in fact, beginning to contemplate changing your name because these people have ruined your reputation.
You’re not the only one in this situation. And if regulatory organizations in Nigeria don’t act quickly, more people might still become victims. But the question is, what can be done? Several Nigerians have clamoured for a ban on digital money lending agencies, but will a ban solve the issue?
Wouldn’t a ban affect the agencies that are accredited, transparent, and less brutal? The honest ones. Or are there none of these in the market? What can borrowers do on their part to protect themselves? These are some of the questions we are set to explore in this article.
Table of contents
The Rise of Loan Sharks in Nigeria
The rise of digital money lenders in Nigeria began when RenMoney, Carbon (formerly Paylater), and Branch opened up their doors as the first instant loan apps in Nigeria, owned by Microfinance Banks.
Their mission was to solve the prevailing challenges that customers faced while trying to secure loans from traditional banks, such as long application processes. Nigerians ate up the instant loans without mercy. They appreciated it for various reasons, such as:
- the quick turnout time
- the easy online application process
- the fact that no collateral is required
- accessibility to both individuals and businesses, as traditional bank loans favour businesses over individuals because of security.
These money lenders became like saviours to several people who were in serious financial constraints. As the rave grew, scammers rose in the form of digital money lenders. They took advantage of the desperation of Nigerians to start up fake money-lending businesses with exorbitant interest rates that trap borrowers in a web.
Some other money-lending businesses, though accredited, began to go too far in their quest for repayment. When a borrower defaults on payment for only a day or two, these agencies would slander and harass the customer. Aggrieved with all these, borrowers in Nigeria tagged digital money lenders as “loan sharks.”
Also read: 8 Illegal Digital Loan Companies in Nigeria You Should Avoid 2025
Loan Sharks Ban in Nigeria: Is it Possible?
Many Nigerians have clamoured for loan sharks ban in Nigeria. But the truth is, regulatory agencies cannot just wake up and place a ban on all microfinance banks on the basis of one or two downfalls in their methods of operation. Certain factors must be considered.
Risks and Benefits
Firstly, the risk factor of the operations of microfinance banks has to outweigh its benefits before the government can consider a ban. The risk assessment that led to the ban of motorcycle transport in Lagos is a classic example.
Between 2005 and 2011, the Lagos State government recorded 11,000 deaths arising from motorcycle transport, popularly known as Okada. Between 2013 and 2019, the number jumped to 13,000 deaths and injuries. This showed that Okada posed a great risk to the lives of Lagosians. Surely, people would rather walk to their destination than get killed or seriously injured along the way. These findings led to the eventual ban of Okadas by the Lagos State government.
Consumers must demonstrate that there is a high risk factor involved in order for Nigeria to consider banning loan sharks. But as it is, most loan sharks are doing more good to Nigerians than harm. With the current economic situation, they are a good option in times of emergencies, and many customers attest to that.
“One of the major reasons as to why people prefer loan apps to bank loans is the turnaround time. The turnaround time for a bank loan is extremely long and it involves signing a lot of documents before the loan can be granted. But the loan app has a lesser processing procedure although it is riskier,” he“Because it is very easy to secure a loan online, those with urgent needs even if they’re civil servants, they’ll approach loan apps as it is tied to little or no collateral. That is why when a person defaults in repayment, they’ll use any possible means to get back their funds.”
– Hakeem Ikumogunniyi, Regional Manager, North, Cooperative Mortgage Bank
Legal Framework and Compliance
Operations have to be legally unrecognised for the government to implement loan sharks ban in Nigeria. As it stands, Nigerian law allows for digital money lending. Section 57 of the Banks and Other Financial Institutions Act of 2020 recognises the operations of instant money lenders, thus:
“…such other businesses as the Bank may, from time to time, designate, regardless of whether such businesses are conducted digitally, virtually or electronically only.” Section 57 (2) (j) (x), Banks and Other Financial Institutions Act, 2020.
Thus, as long as a microfinance bank is duly incorporated under the laws of Nigeria and holds a valid fintech license as granted under the Banks and Other Financial Institutions Act, their digital money lending business is valid. Most of the loan sharks in Nigeria have fulfilled this requirement, as they are duly incorporated as Microfinance Banks or Fintech companies.
Notwithstanding these considerations, if a microfinance bank conducts activities that are beyond the scope of what is embedded in the law, such as violating the privacy of customers, they will be penalised. They may be fined, and their license may also be suspended or revoked in the worst case. We shall discuss this in detail as we progress.
Also read: Top 10 Online Banking Apps in Nigeria 2025
Damage Control: How The Excessities of Loan Sharks Can be Restricted in Nigeria
While it may be far-fetched for regulatory agencies to implement a total loan sharks ban in Nigeria, certain measures can be taken to guarantee the safety and security of existing customers and those to come. Here are some necessary measures:
1. Compliance and Regulation Enforcement
Ensuring that the laws and operations guiding their businesses comply with several laws regulates the operations of money lending in Nigeria, but these agencies often violate them, knowing that they would face little to no consequences.
Some include:
- The Nigeria Data Protection Regulation of 2019, part 2, section 2.1(2) states that “anyone who is entrusted with personal data of a data subject or who has the personal data of a data subject owes a duty of care to the said data subject.” This means that such collected data must not be exposed without the person’s consent, nor used to cause harm to the person, etc. Yet, this is the number one issue that customers of digital money lenders usually complain of; their data is often used to bring harm, shame and discredit to them.
- Section 15(1)(c) of the Lagos State Money Lenders Law 2009 states that only ‘simple’ interest at the rate of 48 per cent (maximum) per annum to be added on unsecured loans, which is the kind of loans that digital money lenders provide. However, some still charge exorbitant rates.
- Google Play Store policy mandates that financial apps “display their maximum Annual Percentage Rate (APR), calculated for their customers.” and that they must refrain from subjecting their users to deceptive financial practices.
If regulatory agencies show their commitment to punishing offenders of the above violations and more, fintech businesses will take the guiding laws more seriously. In August 2021, the National Information Technology Development Agency (NITDA) fined Soko Lending Company 10 million naira for repeatedly harassing a customer. Moves like this should be taken more frequently, as they serve as warnings to other companies. Google has also removed some loan apps from its Play Store for violating its policies, such as SoftPay, Sokoloan and Speedy Choice.
2. Legislative Initiatives and Public Awareness
In December last year, the Kenyan government enacted a law to address the excesses of microfinance lenders. Nigeria should emulate the same. Although several existing laws guide the operations of digital money lenders, we must dedicate a law solely to this matter, considering the complaints of users. This would reiterate the seriousness of lawmakers on the issue.
Mass sensitization is also important. Due to the economic hardship, Nigerians often find themselves rushing to take a loan without settling to peruse the terms of the service. Nigerians must be reminded of their legal rights and obligations, and how to report violations. This can be done through social media, TV stations, and other media outlets.
Customers must also take care to do their due diligence before entering into a loan agreement with Microfinance Banks. Review the terms of service and ensure you are comfortable with them before you engage.
Also read: Nigeria’s Top 10 Tech Brands in 2025
Frequently Asked Questions
How Do I Prevent Loan Sharks in Nigeria From Gaining Access to My Contacts?
You can turn off permission to your contacts in your settings. Here’s how to do this: Go to settings on your smartphone, then find apps. Find the loan app and click on “Permissions.” All the permissions that are currently turned on would pop up. Turn off the Contacts permission. However, note that most loan apps may not proceed with your application processing if they are not granted permission to your Contacts.
What Loan Sharks in Nigeria Have Been Delisted from Playstore?
Some loan apps in Nigeria that Google Playstore delisted are EasyCredit, GoCash, Here4U, Kashkash, ChaCha, Easy, MoniSoftPay, Sokoloan, Speedy Choice and Maxi Credit. Avoid borrowing money from any of these loan agencies.
How do I Recognise a Fake Loan App in Nigeria?
Loan sharks that make over-the-top promises, charge exorbitant interest rates, or seek permission to your contacts and other private information are possibly fake.
Conclusion
Dealing with loan apps in Nigeria is extremely tactical. You just have to be as wise as they are, and no one will come out of the contract hurt. Your village people are not after you; you just need to be more cautious when seeking loans from digital money lenders.
Don’t let the instant disbursement lure you. Take your time to read the terms of engagement, and consider their effect on you before you go ahead. Also, try to pay your debts as soon as possible.
And for more financial advice, our blog is always here to serve you.
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