BNPL Defaults Rise Amid FMCG Market Growth in Nigeria
The buy-now-pay-later (BNPL) sector in Nigeria is facing an increase in defaults, even as the country’s fast-moving consumer goods (FMCG) market experiences steady growth. With inflation driving up prices, more consumers are turning to BNPL services to finance everyday purchases. However, higher default rates are putting pressure on lenders and could impact future access to credit.
BNPL Defaults on the Rise
Several BNPL providers in Nigeria report a surge in repayment delays, particularly among lower- and middle-income consumers who rely on these services to manage rising costs. Inflation, which hit 33.69% in April 2024, has reduced consumers’ purchasing power, making it harder for many to meet repayment obligations.
Industry players say some defaulters are shifting their spending towards essentials like food, prioritizing survival over debt repayments. This trend is leading lenders to tighten credit approval processes, raising concerns about BNPL’s long-term sustainability in the Nigerian market.
FMCG Market Benefits from BNPL Adoption
Despite repayment challenges, the FMCG sector is reaping the benefits of BNPL adoption. The model has made everyday essentials more accessible, allowing consumers to buy products they might otherwise have struggled to afford upfront.
With demand for FMCG products remaining strong, retailers and manufacturers are leveraging BNPL partnerships to drive sales. Some brands are even tailoring promotions around BNPL schemes, recognizing their role in sustaining consumer spending during economic strain.
Striking a Balance Between Growth and Risk
As default rates continue to climb, BNPL providers are revising their risk assessment strategies. Stricter eligibility criteria and enhanced credit monitoring are being implemented to minimize exposure. Some industry experts suggest that for BNPL to remain viable, lenders must strike a balance between expanding financial inclusion and mitigating risks associated with economic volatility.
For FMCG brands and retailers, the future of BNPL in Nigeria will depend on whether these credit services can sustain their operations without accumulating unsustainable debt levels. While the model has driven short-term gains for the sector, long-term success will require stability in consumer repayment behavior and regulatory oversight.