Responsible borrowing can help Nigerians reach financial goals, expert says

Responsible borrowing, when approached strategically, can serve as a crucial financial tool for achieving both personal and business objectives, according to Gloria Onosode, Director of Enterprise Sales at FairMoney Business. While traditional advice often frames debt as a last resort, a changing economic landscape reveals its potential as a driver of sustainable growth when used within repayment capacity.

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To build a sustainable financial future, we must change our relationship with credit. Borrowing shouldn’t be a cycle of survival; it should form part of a broader financial plan designed to support sustainable growth.

Onosode emphasizes a shift in mindset, moving away from viewing borrowing as a cycle of survival towards integrating it into a broader financial plan. The key distinction lies in understanding the purpose of the borrowed funds. Borrowing to purchase luxury items or consumer gadgets that do not generate income merely advances future earnings to cover present consumption without a return, thus draining cash flow.

Conversely, 'good debt' functions as an investment. This includes deploying capital to acquire income-generating assets, increase productivity, or fund specialized training. For instance, borrowing to buy a delivery truck for a logistics company or to stock up inventory for a peak retail season represents an investment in future income generation. Such purposeful loans, when integrated into a long-term plan, enable borrowers to capitalize on business opportunities that might otherwise take years to save for.

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At its core, the difference between constructive and destructive borrowing comes down to one fundamental principle: what does the cash do once it lands in your account?

Onosode advocates for leveraging purposeful borrowing to achieve ambitious milestones. The fundamental principle differentiating constructive from destructive borrowing lies in what the funds achieve once they are in the borrower's account. Productive borrowing enhances future earning potential, whereas consumption-based borrowing depletes resources without a corresponding increase in wealth or income.

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When you borrow to buy a delivery truck for your logistics company, stock up on inventory ahead of a peak retail season, or fund a specialised certification, you aren’t spending money, you are investing in assets that may contribute to increased productivity and income generation.