Introduction

The deployment of technology for financial services has resulted in the rapid proliferation of digital lending companies in Nigeria. Online lending refers to the extension of credit through digital platforms, subject to contractual obligations, consumer protection laws and terms concerning interest rates, loan tenure, repayment schedules and default. Digital Money Lenders (DMLs) have transformed the credit landscape by providing quick, low-amount, short-term loans. These loans are accessible through mobile applications and are often without collateral or lengthy documentation. Their ease of access and instant disbursement make them attractive to people who would otherwise remain underserved by traditional financial institutions (Adeniyi, 2023; Osuluku, 2024).

App-based micro-lending is popular in Nigeria due to the fact that conventional banks generally require collateral as well as bureaucratic procedures that are otherwise overwhelming before accessing loans. During the COVID-19 pandemic, lockdowns and losses of income pushed many financially vulnerable people towards digital financial transactions and borrowing. Fintech has significantly improved access to banking, savings, credit and investment opportunities, particularly among young, digitally adept users. However, there remain rural infrastructure gaps and concerns about security and trust (Children and Young People Living for Peace [CYPLP], 2025; Iroakazi & Ade, 2025).

Alongside these gains, the digital lending ecosystem has become porous to exploitative practices, including excessive interest rates, invasion of data privacy and cyberbullying. Some loan applications have turned credit advancement into a system of harassment, threats as well as causing damage to reputation. The central concern is therefore not digital lending itself, but the conduct of lenders that take advantage of borrowers’ financial distress and unequal bargaining positions. When such conduct extends into homes, workplaces, social networks and digital infrastructure, its consequences go beyond a private debt dispute (Omolale, 2026; Osuluku, 2024).

This article examines the nature and operations of loan shark apps, factors driving their patronage, effects on victims and the wider implications for national security in Nigeria. It also assesses regulatory responses and proposes measures that could help protect borrowers without undermining the contribution of responsible fintech to financial inclusion and development.

Conceptual Clarification

A loan shark is generally understood as a predatory or unauthorized lender that provides loans for short periods. This usually involves excessively high interest rates, imposes oppressive or misleading terms and resorts to intimidation or other coercive methods to recover debts. Although not every digital lender is a loan shark, the label is more appropriately associated with exploitative lending practices than with the technology used to provide financial services. Digital lending, in itself, represents a financial innovation that enables individuals and businesses to access credit through electronic platforms, particularly mobile applications, without necessarily visiting conventional financial institutions. However, such services become predatory when lenders impose unfair repayment conditions, conceal borrowing costs, misuse customers’ personal information or employ unlawful debt-recovery practices (Oti, 2024; Regulating online lending in Nigeria, 2025).

Loan shark applications can therefore be understood as digital lending platforms that engage in exploitative credit practices, including excessive charges, unusually short repayment periods, misleading contractual terms and coercive recovery methods. These practices may expose borrowers to recurring indebtedness, particularly when accumulated interest, service charges and default penalties exceed their repayment capacity. Consequently, the distinction between legitimate digital lending and loan shark operations is important for understanding how financial services intended to promote inclusion may also create risks to individual welfare and wider societal security (Oti, 2024; Osuluku, 2024).

Drivers and Factors Responsible for the Proliferation of Loan Shark Apps

The proliferation of loan shark apps in Nigeria reflects economic hardship, limited access to formal credit, technological innovation, commercial incentives and weaknesses in regulatory enforcement. Although financial technology has expanded access to borrowing, it has also created opportunities for unscrupulous operators to exploit financially vulnerable consumers. The demand for quick loans, particularly among low-income households and individuals facing urgent financial obligations, provides a favorable environment for the expansion of digital lending platforms, including those engaging in predatory practices (Iroakazi & Ade, 2025; Regulating online lending in Nigeria, 2025).

Financial hardship and limited access to conventional credit are major factors driving the patronage of loan applications. Low earnings, unemployment, rising living expenses, school fees, medical emergencies and other household responsibilities increase the demand for small, immediate loans. Conventional financial institutions often require collateral, extensive documentation and lengthy procedures that many underserved borrowers cannot meet up with. The economic disruptions associated with the COVID-19 pandemic further intensified financial insecurity and increased reliance on digital lending services. The Children and Young People Living for Peace (CYPLP, 2025) assessment identifies collateral requirements, time constraints and bureaucratic procedures as important reasons borrowers turn to digital lenders.

Evidence of household financial pressures further illustrates the conditions that encourage loan app patronage. A study reported by The Guardian on 23 October 2023 found that 27% of Nigerians across income categories resorted to loan apps to sustain living expenses. The same report indicated that 49% of individuals earning ₦30,000 and below spent their entire income on food, while 47% of those earning between ₦31,000 and ₦50,000 also spent all their income on food (The Guardian, 2023). These figures show the gravity of financial pressures low-income earners face and their potential vulnerability to exploitative lending arrangements.

Similarly, a Ghanaian online survey involving 82 victims identified the need for basic necessities, quick and accessible funds, entrepreneurial activities, social pressures and personal circumstances as significant motivations for borrowing from loan sharks (Oti, 2024). Although the study was conducted outside Nigeria, its findings illustrate how financial exclusion and immediate household demands can expose borrowers to predatory lending practices. In Nigeria, Iroakazi and Ade (2025), drawing on a sample of 600 respondents across Anambra, Lagos and Rivers states, similarly emphasized the importance of accessible financial services while identifying persistent concerns about security and trust.

Technological advancements and the widespread use of smartphones have also facilitated the proliferation of digital lending applications. Mobile platforms provide lenders with the opportunity to advertise their services as well as reach wide prospective customers. It also enables them to process applications, approve loans and disburse funds rapidly without maintaining extensive physical branch networks. Instant funding, minimal documentation and simplified application procedures make these services attractive to individuals seeking immediate financial assistance. However, some operators exploit these technological advantages by conducting inadequate creditworthiness assessments and advancing loans without properly evaluating borrowers’ repayment capacity. This combination of accessibility and weak screening encourages high-risk lending practices and increases borrowers’ exposure to exploitative arrangements (Iroakazi & Ade, 2025; Regulating online lending in Nigeria, 2025).

The commercial incentives associated with excessive interest charges, short repayment periods, hidden deductions and default penalties constitute another contributing factor. Some dishonest operators impose repayment conditions that place substantial financial pressure on borrowers. This increases the likelihood of repeated borrowing and prolonged indebtedness. The CYPLP (2025) assessment documents complaints involving excessive charges and restrictive repayment periods among Nigerian borrowers. Similarly, Oti (2024) reports repeated borrowing and difficulties saving among surveyed victims in Ghana. These findings illustrate how exploitative lending arrangements can sustain borrower dependence, although they do not independently establish the profitability of individual lending companies.

Furthermore, regulatory weaknesses and limited consumer awareness contribute to the persistence of predatory digital lending. Oversight of lending activities involves the Central Bank of Nigeria (CBN), the Federal Competition and Consumer Protection Commission and relevant state money-lending authorities. However, difficulties identifying operators, monitoring compliance and tracking applications distributed through external links complicate enforcement. Some operators may exploit regulatory gaps to continue their activities despite restrictions or enforcement measures. At the consumer level, limited financial and digital literacy often prevents borrowers from recognizing hidden charges, intrusive application permissions, misleading repayment conditions and available complaint mechanisms. Addressing these challenges requires stronger regulatory supervision, improved access to legitimate credit facilities and sustained public education on responsible borrowing and consumer rights (Adeniyi, 2023; Osuluku, 2024; Iroakazi & Ade, 2025).

Modus Operandi of Loan Shark Applications

The operations of loan shark apps commonly begin with attractive advertisements promising an immediate loan without collateral or cumbersome checks. Prospective borrowers download an application or follow a link, provide a telephone number and personal details, and may permit access to photographs, contacts and other phone data. The approval process is usually short, whereas the full cost of borrowing only becomes clear after disbursement. In some cases, the amount received is less than the nominal loan because fees have already been deducted (CYPLP, 2025; Kaledsi & Olukoya, 2022).

Loan tenure and high charges form an important part of the problem. Investigations have documented digital loans repayable within 7 to 14 days, with interest charges approaching 50% and, in some cases, reaching 60% of the loan amount. These practices impose substantial repayment burdens on borrowers and increase the risk of indebtedness. In one Nigerian case reported by Kaledsi and Olukoya (2022), a borrower received ₦5,000 and was required to repay it with 60% interest within two weeks. A September 2025 report described a borrower who obtained ₦30,000 at 21.6% interest, due in two weeks (Agence France-Presse [AFP], 2025).

Upon default, some recovery agents repeatedly call borrowers, send threatening SMS and WhatsApp messages, contact people who never guaranteed the loan and publish allegations that the borrower is a fraudster or criminal. The CYPLP report describes impersonation of lawyers, purported court notices, threats of police arrest and the circulation of customers’ photographs. It also records complaints about deductions and over-deductions from bank accounts, including after repayment and difficulty locating functional company addresses or obtaining a response to complaints (CYPLP, 2025).

This strategy converts personal information into an instrument of coercion. Contacts who were not parties to a loan agreement are usually dragged into a recovery campaign, while the borrower is publicly disgraced or blackmailed. An investigation published by the Nigerian Tribune reported an instance in which a borrower’s Bank Verification Number and family photograph were circulated, and another in which contact with a prospective client resulted in the loss of a business project (Adewakun, 2025). The allegations are important as testimony of harm; however, individual cases should not be assumed to describe the conduct of every registered lender. Illegal operators may also avoid established application stores and reach customers through external links, making identification and enforcement difficult (Adewakun, 2025).

Scope of the Problem and Documented Experiences

The CYPLP independent assessment employed an exploratory method through WhatsApp focus-group discussions with verified victims and information from an online petition. It reported that 27 victims tendered evidence and participated actively in the discussion. The petition review, which covered 11 August 2021 to 11 November 2021, recorded 2,227 views, over 1,000 signatures and 410 social-media shares. Participants described high charges, short repayment periods, abusive recovery communication, unauthorized disclosure of data and limited knowledge of complaint mechanisms (CYPLP, 2025). The assessment further documented screenshots of defamatory messages allegedly circulated to borrowers’ contacts, revealing how debt recovery practices extended beyond individual borrowers to their families, friends and professional relationships. These experiences demonstrate the potential consequences of unauthorized personal data disclosure and the difficulties vulnerable borrowers encounter when seeking protection against abusive lending practices.

Specific documented experiences further illustrate the nature of these practices. AFP (2025) reported the experience of Mariam Ogundairo, who borrowed ₦30,000 through a digital lending application at an interest rate of 21.6%, repayable within two weeks. When she could not meet the repayment deadline, debt collectors reportedly contacted people on her phone’s contact list, disclosing her indebtedness and causing considerable embarrassment and emotional distress. Her experience demonstrates how access to borrowers’ personal information can become an instrument of intimidation rather than a legitimate means of assessing creditworthiness or recovering loans.

Another documented case involved Ronke Okun, a university student in southwestern Nigeria, whose experience was investigated by Shehu (2023). According to the report, Camelloan credited her account with ₦6,000 despite her claim that she had not applied for a loan, subsequently demanding ₦11,000 within seven days. She also reported harassment involving another application, Deloan, after borrowing ₦5,000 with a repayment obligation of ₦8,730. Although she repaid the principal and requested additional time to settle the outstanding ₦3,730, the company’s agent allegedly circulated messages falsely announcing her death. The ICIR published screenshots accompanying the allegations and sought responses from representatives of the lending companies. This case highlights the risks associated with unsolicited loan disbursement, disproportionate repayment demands, reputational attacks and the use of personal information to exert pressure on borrowers.

The Nigerian reports also show changing regulatory counts that should not be merged into one figure. AFP (2025) reported 408 Federal Competition and Consumer Protection Commission (FCCPC)-approved loan apps, up from 269 in September 2024, with 42 receiving conditional clearance; it also reported 47 delistings and 88 apps placed on watchlists. In February 2026, Omolale (2026) reported that, as of late 2025, there were 492 registered digital lenders, including 457 with full approval, and over 100 illegal or unregistered operators on an FCCPC watchlist.

The documented experiences reveal recurring patterns of intrusive data collection, threats, public humiliation and recovery practices that affect individuals beyond the original loan agreements. In particular, the circulation of defamatory messages to third parties raises concerns about personal privacy, psychological security and public confidence in digital financial services. Such practices also expose weaknesses in consumer awareness, complaint resolution and the enforcement of responsible lending standards. Although the individual cases cannot establish the nationwide prevalence of abusive lending, their recurrence across separate investigations indicates that the problem extends beyond isolated complaints and warrants coordinated regulatory attention.

The persistence of complaints despite earlier enforcement action suggests the need for monitoring beyond one-off registration and app-store removal. The evidence points to a serious consumer-protection problem. However, it does not provide a nationally representative prevalence estimate of people harmed by loan shark apps.

Effects on Borrowers, Families and Communities

The most immediate effect of predatory lending is financial distress. High interest rates, hidden deductions, repeated borrowing and accumulating penalties can erode income and make it difficult to save or meet basic needs. In Oti’s (2024) Ghanaian survey, 96.3% of participants reported that borrowing from loan sharks had affected their financial stability. The study describes difficulties in saving, reliance on another loan, use of salaries to settle debts and persistent financial burdens. Although the result is specific to that sample, similar concerns appear in Nigerian complaints about deepening poverty, lost businesses and deductions from bank accounts (CYPLP, 2025).

Social consequences may be equally damaging. The use of contacts and public accusations exposes borrowers to disgrace, damaged relationships and loss of trust in their communities. Oti (2024) reported that 95.1% of surveyed victims believed loan shark activities had affected their social lives. In the Nigerian assessment, petition supporters described family disputes, impaired business relationships, employment losses and the circulation of defamatory messages even after repayment. These experiences demonstrate how a simple financial transaction can result in public embarrassment and humiliation (CYPLP, 2025).

Psychological effects include fear, shame, anxiety, depression and severe emotional distress. Oti (2024) reported that 13.9% of respondents in the Ghanaian study had once attempted to end their lives. In Nigeria also, there are reports of victims who contemplated suicide following threats from loan recovery agents (Adewakun, 2025). Such reports warrant serious attention and accessible support; however, they do not establish a national suicide rate or prove that a lender was the sole cause of an individual death.

The impact on third parties is particularly troubling. People whose phone numbers appear in a borrower’s contact list may receive threats and accusations without consenting to the loan or providing a guarantee. Kaledsi and Olukoya (2022) reported an interview with a person harassed because another borrower had listed him as a contact. A harmful recovery process thus spreads beyond the borrower and creates insecurity among relatives, colleagues and other members of the public.

Implications for National Security

National security includes the protection of the population, economic welfare, public institutions and the conditions necessary for peaceful social life. Although the highlighted evidence does not establish that loan apps have directly caused a national security crisis, it does identify several plausible pathways through which persistent predatory digital lending weakens human security and institutional stability.

First, there are implications for human security and social cohesion. When citizens are threatened, publicly shamed or exposed to sustained psychological pressure over small debts, their sense of safety and dignity is undermined. The loss of jobs, family conflict, community stigma and possible self-harm described in the materials weaken personal well-being and resilience. Where many households already face financial hardship, exploitative recovery methods can intensify existing social grievances (CYPLP, 2025; Oti, 2024). Also, a frustrated victim is prone to indulging in crime either in an attempt to meet repayment demands or simply out of accumulated aggression.

Also, loan shark apps pose information-security and privacy risks. Unauthorized access to phone contacts, photographs, identification details and financial information creates opportunities for harassment, identity misuse and further cyber-enabled abuse. Dissemination of personal data to third parties also exposes individuals who never entered into the lending contract. Osuluku (2024) identifies privacy breaches affecting both customers and third parties, while Adeniyi (2023) describes how platform controls were developed in response to these practices. Protecting personal data is therefore not merely a customer-service issue; it is part of protecting the integrity of the digital environment. There is also the danger of these loan sharks selling customers’ details to the highest bidders which further undermines their privacy and safety.

Furthermore, predatory lending can affect economic security. The repeated diversion of wages and business revenue into short-term repayment obligations reduces funds available for food, healthcare, education, savings and enterprise. Evidence of cancelled business opportunities, lost livelihoods and debt cycles indicates a risk to household productivity and wider economic participation (Adewakun, 2025; CYPLP, 2025). Responsible digital lending can promote financial inclusion, but exploitative practices often reverse these benefits by pushing borrowers deeper into vulnerability and poverty.

Additionally, weak enforcement erodes confidence in public institutions and the rule of law. Borrowers who cannot identify a lender, secure a response to complaints or prevent the circulation of private data may conclude that legal protections are ineffective. The reappearance of operators through new links or names can reinforce this perception. The likely national-security concern is not that every lending dispute threatens the state, but that repeated, visible rights violations and inadequate remedies can contribute to distrust and social instability (Adewakun, 2025; AFP, 2025).

Finally, the comparative research from Vietnam indicates that legal loopholes in online lending can be exploited by criminal groups (Nguyen et al., 2021). For Nigeria, this finding supports a preventive focus on beneficial ownership, transaction traceability and coordinated investigations. It would be inappropriate to infer, without Nigerian evidence, that all unregistered apps are part of organized criminal networks or that their proceeds finance other crimes.

Regulatory Framework and Responses in Nigeria

Nigeria’s response to exploitative digital lending involves financial regulation, consumer protection, data protection and criminal investigation. The Central Bank of Nigeria (CBN) exercises powers under the Banks and Other Financial Institutions Act, 2020, while state money-lending laws also apply to relevant operations. The FCCPC introduced the Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending in 2022, including registration and operational-disclosure requirements (Osuluku, 2024; Regulating online lending in Nigeria, 2025).

Section 37 of the Constitution of the Federal Republic of Nigeria, 1999 (as amended), protects privacy. The Nigeria Data Protection Act, 2023, provides a framework governing the processing of personal data, including rights and obligations associated with lawful processing, and establishes the Nigeria Data Protection Commission (NDPC). Customers and affected third parties may pursue complaints with competent regulators, fundamental-rights actions and remedies relating to defamatory publications, depending on the circumstances (Osuluku, 2024).

Consumer protection measures have also depended on cooperation with digital platforms. Adeniyi (2023) explains that the Google Play Store rules updated for Nigeria in May 2023 required disclosure of repayment periods, annual percentage rates and the representative total cost of a loan. The policy also prohibited personal-loan apps from accessing sensitive contacts and photographs and restricted the listing of applications requiring full repayment in 60 days or less.

Actions against defaulters include enforcement through registration, investigation, fines, delisting of applications and restrictions on supporting services. However, offenders may change names, distribute applications outside official stores or use other evasive practices. Effective oversight therefore requires more than an approval list: it demands verification of operators, transparent ownership, ongoing compliance checks, inter-agency coordination and workable relief for affected borrowers (Adeniyi, 2023; Adewakun, 2025).

Recommendations

To address the problem while preserving the benefits of fintech, the following measures are recommended:

  1. The FCCPC, CBN and relevant state authorities to strengthen the registration, licensing and continuous monitoring of digital lenders, including verification of physical addresses, directors, beneficial ownership, charges, repayment terms and debt-recovery procedures.

  2. The NDPC and FCCPC to investigate complaints of unauthorized personal-data processing, contact-list harvesting and defamatory recovery messages, and ensure appropriate sanctions and accessible mechanisms for redress where violations are established.

  3. The Nigeria Police Force (NPF) and the Economic and Financial Crimes Commission (EFCC), within their lawful mandates, to investigate credible evidence of impersonation, threats, fraud and cyber-enabled offences connected to lending operations, and ensure that offenders are prosecuted where sufficient evidence exists. Relevant legislative authorities should also introduce stiffer penalties for loan shark operators found guilty of harassment, intimidation, unlawful debt-recovery practices and other criminal abuses, while ensuring that ordinary inability to repay a civil debt is treated appropriately.

  4. Digital lenders to be required to disclose interest, fees, repayment schedules and consequences of default in clear language before disbursement, assess repayment capacity and adopt ethical recovery based on dialogue, respect for privacy and lawful dispute resolution.

  5. App stores, telecommunications companies and payment-service providers to cooperate with competent authorities, subject to applicable law, in preventing repeat offenders from using digital infrastructure to continue abusive operations.

  6. Government agencies, civil society organizations and fintech providers to expand financial and digital literacy, especially among youths, low-income households and rural communities, and publicise simple complaint and evidence-preservation procedures.

Conclusion

Digital lending has improved access to financial services in Nigeria; however, loan shark apps have introduced damaging practices into a market serving financially vulnerable people. The evidence reviewed shows complaints of exorbitant interest, short repayment periods, abusive communication, contact-list misuse, unauthorized disclosure of personal information, reputational harm and financial distress. The paper reinforces the seriousness of these social effects. The effects on national security are best understood through human security, economic well-being, cybersecurity, social cohesion and trust in public institutions. The way forward is not to discourage legitimate borrowing or financial innovation, but to ensure that debt recovery remains lawful and proportionate, privacy rights are protected, complaints are investigated and victims can obtain effective remedies. Only coordinated oversight and ethical lending standards can reconcile financial inclusion with the protection of citizens and national stability.

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