Consumer Credit Scheme: How Desirable?

On Thursday  May 2, 2024 , an analyst on national radio programme lambasted some Nigerians who did not buy the idea of the consumer credit scheme that was recently approved by the Federal Executive Council and launched by President Bola Tinubu.
A statement from the presidential media office, had indicated that the scheme which will be run by the Nigerian Consumer Credit Corporation (CREDICORP), will offer credit facilities to working citizens in the country and will be implemented in stages, starting with public or civil servants and later extend to the general public.
The analyst did not see the reason why some people should kick against the initiative which in his view offers several advantages of Increased Purchasing Power including:  providing individuals with the ability to purchase goods and services even if they do not have the full amount required at the point of sale;  offering a convenient way to manage cash flow, allowing consumers to spread the cost of a purchase over a period that suits their financial situation; helping people acquire essential items—like refrigerator or car—that they might not be able to afford upfront, thereby improving their quality of life; providing a critical resource in emergency situations, allowing consumers to afford necessary services or repairs that they might not have the immediate funds to cover, among others.
Definitely, advantages of consumer credit schemes abound.
The scheme can greatly enhance purchasing power and provide financial flexibility but we must also admit that it is a double-edged sword and can lead to debt accumulation and financial hardship if not used wisely.
Consumer credit schemes can carry high interest rates and fees, particularly if the balance is not paid off during any interest-free period offered. This can significantly increase the overall cost of the purchased goods or services.
Easy access to credit can lead to overspending and the accumulation of debt, particularly if consumers use credit impulsively or fail to manage their repayments effectively. Missing payments or defaulting on a credit agreement can negatively impact a consumer’s credit score. Poor credit scores can restrict access to future credit and result in higher interest rates on loans.
Again, relying too heavily on credit for regular purchases can lead to financial dependency, reducing a consumer’s ability to save and prepare for future financial needs. It is also a known fact that some credit agreements come with complex terms that can be difficult to understand. This can lead to unexpected charges or conditions that a consumer may not be fully aware of, when entering into the credit agreement.
While this write-up is not aimed at an in-depth focus on the merits and demerits of consumer credit schemes, it is aimed at looking at the suitability of the scheme in present day Nigeria. The nation’s economy is in comatose. Poor electricity supply, high electricity tariff, high cost of petrol and diesel and other economic variables are forcing a lot of companies to pack up.
For some unclear reasons, there has been fuel scarcity in the nation’s capital, Abuja and other cities across the country for over two weeks. While NNPC claims it is due to logistic and vessel problems, the Independent Petroleum Marketers Association of Nigeria (IPMAN), through its Public Relation Officer, Chinedu Ukadike stated categorically that the current fuel scarcity is because “most of the refineries in Europe are undergoing turnaround maintenance.”
Nigeria catches fever whenever Europe and other continents that refine our crude oil cough because we have failed to make the nation’s refineries work. Deadline upon deadline had been given by the federal government on when Port Harcourt and other refineries in the country would commence operation, all to no avail.
One will want to believe that a government that loves its citizens would address the pressing economic challenges before embarking on a consumer credit scheme. Let power supply be made stable and affordable, the refineries be brought back to life to guarantee steady supply of petrol at an affordable price and the value of the nation’s currency be improved so that the salaries of civil servants and other workers will be more meaningful. It is not a question of a new “living wage” or “minimum wage”. It is rather a question of healing the economy and strengthening the Naira so that the workers’ salaries will be more valuable.
What is the essence of encouraging workers to partake in a consumer credit scheme when they are likely to miss payments or default on credit agreement due to numerous financial pressures on them? Is that not capable of increasing their financial stress and anxiety and thereby impact other areas of their lives?
In the past, many civil servants in the country augmented their salaries through agriculture. I remember my uncle, a civil servant working in Enugu, coming to the village almost every weekend to carry out some work on his farms in Uzo-Uwani Local Government Area of the State and when going back to Enugu on Sunday, he goes with jerry cans of palm oil and different kinds of food items from his farms. Today, due to the lingering insecurity in communities across the country, many civil servants hardly visit their villages not to talk of going to farms. So they depend solely on their salaries.
Of course, the launched consumer credit scheme is optional but necessary steps must be taken to improve the economy, security and the living standard of the citizens so that anyone who opts to obtain a loan through the scheme will not have a nightmare servicing the loan. CREDICORP and other relevant authorities also owe the citizens the duty of explaining the nitty gritty of the scheme to the citizens. Let the consumers know that what they are taking is a loan that must be paid within a specified duration with an interest – not a grant.
It is important that consumers, that is, federal and state civil servants and others included in the first phase of the scheme , are advised to carefully consider their financial situation and the terms of credit agreement before committing to the consumer credit scheme so as to minimise risks and enable consumers to maximise the benefits of the scheme.
It is hoped that the experience of previous federal government loans like the CBN’s Anchor Borrowers Programme, the Targeted Credit Facility (TCF), introduced by the CBN to support households and SMEs affected by the Covid-19 pandemic does not repeat itself. We saw some beneficiaries of the TCF protesting when commercial banks began the loan recovery, claiming that what they received was Covid-19 grants not loans and it should not be repaid. The would-be beneficiaries of the Consumer Credit Scheme must be properly educated. Adequate mechanisms must be put in place to ensure recovery of the loan from defaulters.
CREDICORP must also ensure that only the eligible citizens who have applied for the loan got it. It should not be a way of empowering some political party members or people that are highly connected.  According to the special adviser to the president on media and publicity, Ajure Ngalale, “The scheme will be rolled out in phases, starting with members of the civil service and cascading to members of the public.” The president believes every hardworking Nigerian should have access to social mobility, with consumer credit playing a pivotal role in achieving this vision.” Nigerians await the materialisation of this.

Calista Ezeaku