Why smart borrowers are building wealth while others stay trapped in debt – Onosode

Smart borrowers are increasingly using credit as a tool to build wealth and grow businesses, while others remain trapped in debt because they borrow for consumption rather than income-generating activities, according to Gloria Onosode, director of Enterprise Sales at FairMoney Business.

Speaking to BusinessDay, Onosode said the long-held perception of debt as a sign of financial distress is changing as more entrepreneurs and professionals recognise that responsible borrowing can accelerate business expansion, increase productivity and improve long-term financial outcomes when tied to clear repayment plans and productive investments.

She said the difference between successful borrowers and those caught in debt cycles lies not in the act of borrowing itself, but in how the borrowed funds are deployed, noting that loans used to acquire business assets, finance inventory or invest in skills can create returns that exceed their financing costs.

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“For many years, debt was seen as something to avoid at all costs. But borrowing, when done responsibly and within one’s repayment capacity, can become an important financial tool for building long-term wealth,” she said.

She explained that productive borrowing differs fundamentally from borrowing for consumption.

Using loans to purchase inventory, commercial vehicles, manufacturing equipment or finance professional training can generate income that exceeds the cost of borrowing. On the other hand, borrowing to fund luxury purchases, expensive celebrations or gadgets that do not increase income merely shifts future earnings to pay for present-day consumption.

The distinction, she said, determines whether debt becomes a financial burden or a growth catalyst.

The message comes at a time when many Nigerian businesses, particularly small and medium-sized enterprises (SMEs), continue to face severe working-capital shortages despite growing market opportunities.

According to Onosode, cash-flow gaps remain one of the biggest obstacles preventing SMEs from expanding. Businesses often receive large customer orders but lack immediate capital to purchase inventory or execute contracts, forcing them to lose opportunities while trying to raise funds.

“Appropriately structured financing helps businesses bridge temporary cash-flow gaps so they can convert opportunities into revenue instead of watching them disappear,” she said.

She also noted that Nigeria’s persistent inflation has changed the economics of waiting to save before making major investments.

Equipment such as manufacturing machines, solar power systems and commercial vehicles often become more expensive over time, making delayed purchases costlier than borrowing to acquire them immediately.

“When productive assets begin generating income today, they can contribute towards financing costs while helping businesses grow,” she said.

Beyond business expansion, Onosode identified education, technical training and professional certification as areas where responsible borrowing can deliver long-term financial returns.

She argued that investments in skills improve productivity and earning potential over several years, making them one of the most valuable uses of credit.

However, she cautioned that borrowing should never be treated as free money.

She advised prospective borrowers to assess their repayment capacity carefully before taking loans, understand all applicable interest rates and charges, and avoid borrowing beyond what their cash flow can comfortably support.

According to her, responsible borrowing rests on three principles: using loans only for productive purposes, developing realistic repayment plans before accessing credit, and choosing lenders that offer transparent pricing without hidden charges.

She stressed that every loan creates a legal repayment obligation and should fit within a broader financial strategy rather than serve as a short-term solution to recurring financial problems.

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“When you remove the stigma around credit, borrowing becomes what it truly is, a financial tool. Used carelessly, it creates financial pressure. Used strategically, it can accelerate business growth and help individuals achieve important financial milestones,” Onosode said.

She urged Nigerians to evaluate the cost of delaying business investments against the cost of responsible borrowing, noting that in many cases, standing still may prove more expensive than accessing well-managed credit.

With access to finance remaining one of the biggest constraints facing Nigerian businesses, financial experts say the conversation is gradually shifting from whether to borrow to how to borrow responsibly and ensure every loan contributes to long-term financial growth rather than deeper debt.