Buy Now, Pay Later: Financial Freedom or Debt Trap?

 Omolabake Fasogbon

As inflation continues to squeeze household incomes and weigh on purchasing decisions, Buy Now, Pay Later (BNPL) services are increasingly becoming a fallback option for Nigerian consumers.

BNPL, described by financial media site Investopedia as a short‑term loan that lets shoppers pay for products in structured instalments, allows immediate acquisition of goods while deferring full payment.

This offer has for long provided relief to individuals on tight budgets, as mostly embraced by retailers trading in product categories such as smartphones, home appliances, electronics and luxury clothing, among others.

Amid shrinking spending power, BNPL is evolving into one of the fastest-growing consumer credit segments, offering both individuals and businesses new ways to manage cash flow.

But as convenient and flexible as this offer allowing the immediate possession of an item with payment spread over up to six months may be, it also conceals a potential trap. 

Globally and locally, data points to BNPL’s growing acceptance, with a very promising outlook. Currently valued at $1.88 billion, Nigeria’s BNPL market is projected to reach $3.96 billion by 2031, positioning it as Africa’s fastest-expanding credit market, driven largely by growth in the digital economy and fintech space.

Across the globe, the trend is not dissimilar. A report by Fortune Business Insights valued the global BNPL market at $44.9 billion in 2025 and projected it will reach $286 billion by 2034, fueled by rising e-commerce, digital payments, and consumer preference for flexible credit.

While Nigeria still trails advanced economies in structured consumer credit, local players are actively filling the space. Providers like CredPal, Carbon Zero, EasyBuy, and CDcare enable shoppers to purchase products immediately and pay over several weeks or months. Depending on the provider and the user’s repayment history, some plans are interest-free, while others attract service charges or financing fees. 

Incumbent e-commerce firms are also exploring the space. In 2024, Jumia Nigeria launched a partnership with EasyBuy and CredPal to enable shoppers pay for purchases in instalments directly at checkout.

Experts note that BNPL fills a critical gap by helping households ease cash-flow pressures, while supporting business growth by allowing enterprises to pay suppliers more confidently.

Even so, they warn this can be financially risky and costly. An economist, Zhu Wang in a research paper published by the Federal Reserve Bank of Richmond, argued that the BNPL model has mixed welfare effects—functioning as a vital cash-flow buffer for some households while accelerating debt accumulation for others.

Investopedia highlights specific consumer risks, including overspending, limited regulatory oversight, and complex return or refund issues. 

Broadly, it warned that BNPL can tempt consumers to overspend because instalments make large purchases feel cheaper. It also cautioned that limited regulation leaves consumers exposed. 

Also to take cognisance of are the terms of purchase, given that risks of hidden fees and penalties can quickly erode the benefits?

But even sellers remain exposed to repayment default from buyers. A study by the Bank for International Settlements (BIS) found BNPL users are typically younger, with lower credit scores and higher delinquency rates.

Head of Embedded Finance at Credit Direct, Faith Ojeiku, argued that Nigeria’s formal BNPL sector struggles to scale due to gaps that include repayment.  

Overall, consumers are advised against being tempted by BNPL offerings. Given the risk, it is recommended that they weigh the pros and cons of BNPL against other financing options before committing. 

And if it has to be BNPL, it should be for essential purchases.