In a nation where over 41 million Micro, Small, and Medium Enterprises (MSMEs) contribute nearly half of the GDP, it’s perplexing that less than 11% have access to formal credit.
In 2016, the Central Bank of Nigeria established the National Collateral Registry to enhance credit access by allowing movable assets as collateral. In 2017, it enacted the Secured Transactions in Movable Assets Act and the Credit Reporting Act, laying the groundwork for a modern credit infrastructure.
Fast forward to 2022, CreditRegistry celebrated two decades of service, noting a 95% increase in digital retail lending transactions, signaling a shift towards embracing technology in credit facilitation.
Despite these strides, the credit gap remains a gaping wound in Nigeria’s economic fabric. Traditional banks, with their stringent requirements and risk-averse nature, have left a vast majority of entrepreneurs stranded on the shores of financial exclusion.
So here’s the million-dollar question: Do we truly need OCEN to bridge Nigeria’s credit chasm, or are there underlying issues that technology alone can’t solve?
At first glance, OCEN (Open Credit Enablement Network) seems like the messiah. It promises to democratize credit by allowing lenders to seamlessly integrate loans into platforms people already use, such as ride-hailing apps, e-commerce platforms, and point-of-sale systems. We dissected what it is and how it could work with open banking in Nigeria.
In theory, this sounds like the ultimate fix. But…
What’s really broken with credit in Nigeria?
First, let’s call a spade a spade. Nigeria doesn’t have a credit problem. It has a credit access problem. The money is there; the banks have it, the microfinance institutions have it, and even some fintech startups have it. But getting that money into the hands of the average Nigerian, at a reasonable cost, is where the struggle begins.
The numbers don’t lie. According to the Enhancing Financial Innovation & Access (EFInA) 2023 report, only 6% of Nigerian adults have accessed formal credit, despite over 45% of the population being banked. Now, compare this to developed markets like the U.S., where over 82% of adults have at least one form of credit facility. The gap is massive, and it exists for three main reasons:
Traditional lenders don’t trust borrowers: Banks in Nigeria operate on a risk-averse model, preferring to lend to blue-chip companies rather than individuals or small businesses. If you don’t have collateral, a well-documented source of income, and an account that has been active for years, your chances of getting a loan are as good as NEPA giving you uninterrupted power during a thunderstorm.
Lending costs are too high: The cost of acquiring and verifying borrowers is expensive. Unlike developed economies where credit bureaus hold extensive financial data, Nigeria’s credit reporting system is still evolving. As such, lenders rely on expensive, manual verification processes, pushing up interest rates. Some digital lenders charge up to 30% per month. Not because they’re greedy, but because they expect a significant percentage of borrowers to default.
The informal economy is invisible to lenders: Over 57% of Nigeria’s GDP comes from the informal sector. Yet, most of these individuals don’t have the kind of financial footprint that lenders need. A trader at Balogun Market may have monthly sales in the millions, but if she operates purely on cash, traditional lenders won’t touch her with a ten-foot pole.
Now, here’s where OCEN comes in, or at least, where it could come in. If credit was truly embedded into the platforms people already use; think Moniepoint POS terminals, Opay wallets, or Jumia transactions. Then, lenders would have real-time, transactional data to assess risk.
How OCEN could actually fix Nigeria’s credit problem
At this point, you might be thinking, “Okay, credit access is a mess. But isn’t OCEN supposed to fix all this?”
Well, yes and no.
The Open Credit Enablement Network (OCEN) isn’t a lender. It doesn’t print money. It’s not coming to sprinkle magic fintech dust and turn Nigeria into a credit utopia overnight.
Let’s look at India, where OCEN was born. India’s credit system had similar problems to Nigeria’s: expensive borrower acquisition, low formal credit penetration, and distrust between lenders and customers. OCEN stepped in to bridge the gap, allowing Loan Service Providers (LSPs) to connect with lenders via APIs, effectively making credit a plug-and-play feature for digital businesses.
Now, let’s bring it back home. Nigeria already has some of the building blocks:
BVN and NIN have made identity verification easier. Unlike the chaos many expected, these systems work and have helped financial institutions onboard millions of customers.
The CBN’s Open Banking Framework exists. It’s still in its infancy, but it lays the foundation for data-sharing between banks, fintechs, and third-party providers.
Digital transactions are booming. Nigeria saw nearly ₦600 trillion processed through NIBSS Instant Payment in 2023 alone. That’s a goldmine of transactional data that lenders could use to assess creditworthiness.
If implemented right, OCEN could do for credit what UPI did for payments in India: turn it into a basic utility. That means borrowing wouldn’t be a privilege for the few with spotless bank statements and collateral. Instead, it could become a frictionless, everyday experience, seamlessly woven into the services people already use. But how exactly would that work?
1. Lowering the cost of acquiring borrowers
Right now, lending in Nigeria is expensive; not because the money itself is scarce, but because finding, verifying, and onboarding the right borrowers costs a fortune. Banks and digital lenders burn money on marketing, identity verification, and fraud prevention, and those costs inevitably get passed on to customers in the form of high interest rates.
OCEN flips this model on its head. Instead of lenders going out to hunt for borrowers, it allows them to tap into platforms where customers already exist: e-commerce sites, ride-hailing apps, logistics platforms, and even agritech marketplaces.
- A merchant selling on Jumia gets an instant working capital loan offer based on their sales volume.
- A POS agent using Moniepoint or OPay gets a short-term liquidity loan based on transaction flow.
- A driver on Bolt can access an auto loan or fuel credit, repaid directly from trip earnings.
With OCEN, lending stops being a high-cost, high-risk guessing game. Instead, it becomes an organic, data-driven process, reducing acquisition costs and unlocking a wider borrower base.
2. Enabling more accurate credit scoring
Sure, credit bureaus exist, but their data is limited, outdated, and often excludes the millions of Nigerians who operate outside the formal banking system. The result? Lenders either reject good borrowers due to a lack of data or overprice loans to cover uncertainty.
OCEN, when integrated with open banking, changes that. Instead of relying on incomplete credit bureau records, lenders can assess risk using real-time transaction data. Think about it:
If someone frequently saves money on Kuda, regularly pays their utility bills via Flutterwave, or spends responsibly on PalmPay, they’ve already demonstrated financial discipline, even if they’ve never taken a formal loan before.
With OCEN’s standardized APIs, lenders can plug into this rich dataset, making more informed lending decisions.
3. Embedding credit directly into everyday services
The real magic of OCEN isn’t just making credit accessible; it’s making it invisible. Instead of forcing people to fill out long application forms and wait days for approval, OCEN allows lending to happen in the background, seamlessly integrated into everyday transactions.
You’re buying a phone on an e-commerce platform, and instead of paying ₦200,000 upfront, OCEN-enabled lenders offer you a Buy Now, Pay Later option instantly.
A small business needs to restock inventory, and instead of applying for a microloan, their supplier automatically extends credit through OCEN-powered financing.
A farmer in Kaduna can purchase fertilizer on credit directly from an agritech platform, repaying after harvest.
This embedded finance approach ensures that loans reach the people who need them most; without friction, without paperwork, and without the usual lender skepticism.
The case against OCEN
Technology alone won’t fix Nigeria’s credit problem. APIs won’t suddenly make Nigerians more creditworthy, nor will they change the deep-rooted cultural and economic issues that make lending difficult in the first place.
Trust and repayment culture: Lending in Nigeria is an extreme sport. Many people take loans with zero intention of repaying. Even with digital lenders using aggressive recovery tactics, default rates remain high. OCEN might make borrowing easier, but does it address the real problem: will people repay?
Data quality issues: OCEN relies on transaction data from digital platforms, but Nigeria still operates a largely cash-driven economy. A trader who does 90% of her business in cash won’t have enough data to qualify for OCEN-powered credit. Until cashless transactions dominate, the impact of OCEN will be limited.
Regulatory and infrastructure gaps: OCEN works best in structured, well-regulated environments. India had UPI and Aadhaar before introducing OCEN, meaning digital identity and payments infrastructure were already solid. Nigeria has BVN and NIN, but implementation gaps still exist. If OCEN launches in a half-baked manner. Without strong governance, lender protection mechanisms, and fraud prevention, it could create more chaos than solutions.
So, does Nigeria need OCEN?
Yes, but not as a magic bullet. Nigeria needs better credit infrastructure, and OCEN could be part of the solution. But it won’t work unless other issues, like financial literacy, borrower accountability, data accuracy, and regulatory enforcement, are addressed.
In short: OCEN is a great tool, but tools don’t build houses. Nigeria needs the right foundations first.
