“I am a civil servant on a Grade Level 12 salary, but I use 70% of my earnings to service debts from bank loans. How can I get out?”

This plea for help comes from a reader with a Master’s degree in Accounting, a poignant example of how even the well-educated can fall into the debilitating trap of debt. The predicament is increasingly common in Nigeria, often stemming from financial indiscipline, greed, or a simple lack of knowledge about the true cost of borrowing.

An experienced medical doctor once remarked that every medicine is a poison. The same principle applies to most modern loan offers. They promise immediate relief but carry severe, often unexpected, side effects that can cripple your finances.

Today, easily accessible loans have become one of the greatest sources of financial loss for Nigerians, second only to Ponzi schemes. A surge of loan offers—from banks and a plethora of mobile apps—targets individuals, especially civil servants and those in “secure employment.”

The Allure and Peril of ‘Click-and-Get’ Loans

The application process has been dangerously simplified. Gone are the days of lengthy paperwork and waiting periods. Now, all that’s required is your NIN, BVN, employment details, and bank account number. With a single click, funds are disbursed. In some cases, loans are even pushed to potential borrowers unsolicited.

The Hidden Cost: Deceptively High Interest Rates

The primary danger lies in the pricing structure. These loans often advertise a low, manageable-looking monthly interest rate. However, this becomes exorbitantly expensive if the loan is not repaid within a very short period.

For example, a 5% monthly interest rate is not 5% per annum. It translates to a staggering 60% per year.

Consider a N100,000 loan at 5% monthly interest:

• Your monthly interest payment is N5,000.
• Over 12 months, you pay N60,000 in interest alone.
• Over 24 months, you would pay N120,000 in interest—more than the original amount borrowed.

This is the stark reality for many salaried Nigerians, like the civil servant who reached out for help. They find themselves on a treadmill, using the majority of their income to service interest, never making progress on the principal, and sinking deeper into financial distress.

In the next part of this series, we will explore practical steps and smart money habits to escape this cycle and achieve financial freedom.