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Smart Money with Arese: The Debt Conundrum



‘Neither a borrower or lender be’ – Shakespeare

We’ve all been there! You lend money to a friend who is supposedly in ‘need’ and you get burnt! Their attitude becomes so belligerent that you start to believe the saying that ‘no good deed goes unpunished’. Then somewhere down the line you are caught in the same situation and another friend asks to borrow money, you are torn between your need to ‘help’ and be considered good person and the fear that you may never get your money back.

So as I got older and the financial responsibility of being an adult got real, I realized that there is an opportunity cost for every Naira I spend. Therefore I had to think carefully about lending money that I may never get back. So I developed a new policy.

As a rule I never lend friends money! It sounds mean but it’s honest. If a friend is in need you must first determine whether this problem is an actual problem or not and then calculate how much you can afford to give them by way of a ‘charitable donation’ towards this problem. It must be money you can afford to forget about. So ‘paying your debt for Brazilian hair’ or paying your travel agent for a ticket to London cannot be the opportunity cost for my daughter’s diapers.

I find that a lot of emphasis is often placed on the perils of bad debt for the debtor and not a lot is placed on the impact a bad debt can have on the lender. There are numerous stories of people who have borrowed money they had set aside for their children’s school fees to their brother who is in ‘need’ with the hopes that they will pay back and when the loan goes bad, they run into financial difficulty. Although culturally, we are geared towards helping others, its important to be discerning when it comes to making decisions about who to lend to and why you are lending them money. (There are some exceptions to the rule, some people have real problems!)

So here are some tips on how to identify people you should never lend money to and what we can learn from their bad debt habits.

3 ways to spot a perpetual ‘onigbese’! (constant debtor) and what you can learn from their mistakes.

They think debt = free money!
Bad debtors generally don’t have a healthy respect for other people’s money. When its time to borrow money their problems are always more important than your own but when its time to pay back you’ll hear statements like ‘is it not just N100, 000’.

Their bad debt habits usually transcend the individual level. These are the sort of people who will borrow money from a bank to start a business, use their uncle’s land as collateral and then spend the money buying a luxury car, renting a flat in Ikoyi and building a tab in all the ‘it bars’ in Lagos. This typically happens because they start spending their profits before they have even started the business. Then when the business fails as a result of misuse of debt, and default charges on the loan start to pile up because of their disregard for other people’s money the consequences become the responsibility of the owner of the collateral and the bank.

What to learn from this: If you borrowed money to grow a business, then by all means grow a business! Don’t convince yourself that buying a luxury car will somehow help increase your profits because if you ask the average Nigerian entrepreneur what their no 1 challenge is, the answer is almost always ‘lack of access to capital’. However, a good percentage of the lucky few who manage to convince a bank to loan them money for their business misuse it because they have the wrong attitude to debt.

They drive more expensive cars than their landlords.
People with bad debt habits will typically go into debt buying things their income cannot support. They will borrow money to purchase big-ticket items that don’t appreciate in value and most likely can’t cover the cost of the debt over time. For example, Toyin drives a N20m car and is still paying off her car loan but doesn’t own her own home so she still pays rent to her landlord. A car is an asset. Granted! But it is a depreciating asset, which means it begins to lose value as soon as you drive it. Therefore it doesn’t make sense to go into debt to acquire a car your current income cannot support.

What to learn from this: Debt can be a useful tool to attain financial success but how you use it matters. Wealthy people use debt as a tool to leverage their investments and grow their cash flows but poor people use debt to buy things that make rich people richer. Only borrow to acquire an asset that will appreciate in value.

They haven’t paid salaries but they are on holiday in Dubai.
People with bad debt habits think their WANTS supersede the NEEDS of others. So for example, they think Wasiu the driver’s salary can wait for another few months when he most likely has obligations of his own (children’s school fees, transportation and food costs) but they are eating out every weekend and buying things they can probably afford to put on the back burner till after they’ve paid their staff.

What to learn from this: A real boss guarantees his team eats (ask Rick ross). So if you haven’t had money to pay your domestic staff for 2 months but you are buying business class tickets to Dubai and eating at ‘Spice’ every weekend. God is watching you in 3D!

Photo Credit: Dreamstime | Wavebreakmedia Ltd

Arese is the author of the bestselling financial chick lit The Smart Money Woman. She is also the founder of a personal finance blog tailored to the African millennial. Arese serves on the boards of House of Tara International Ltd and The Nigeria Higher Education Foundation as a non-executive director and is an associate member of WIMBIZ (Women in Management Business & Public Service). Arese Ugwu has an M.Sc. in Economic Development from University College London (UCL) and a B.Sc. in Business and Management from Aston Business School, Birmingham. She is also an alumna of the of the Lagos Business School, INSEAD Abu Dhabi and The London School of Business executive education programs. . Follow on Twitter: @smartmoneyarese and Instagram - @smartmoneyarese


  1. madam

    July 9, 2014 at 10:49 am

    madam, talk your own…u seem to have something against people and nice cars generally….
    its mostly in nigeria i see all this borrow borrow and not pay back.
    how can you not lend money to your friends???,,,u must be very wicked. why not lend him/her the money and attach an agreement to it,,,if things try to get bad, the agreement will shield u.
    mind u, u dont buy houses just like that!
    i completely dislike this article,,,its gets evryone to think evil…there’s more to life than this!

    • Lee

      July 9, 2014 at 11:46 am

      Awon onigbese ni o!!! Agreement ko, aggression ni!!

    • Zeeze

      July 9, 2014 at 2:58 pm

      @madam are you an ‘onigbese’? Because if you’ve ever been in this situation you would understand why this is a serious issue. Yes I borrow, and paying back is mandatory not optional as most friends and family make it seem when they borrow. I still lend as much as possible when I can, but those that have the courage to ask me know that I will hound you for my money if I have to cause they say it. So before they come they already know what to expect if they are late with my shishi. My two cents, if you do not have the heart to harass, embarass and sometimes unfortunately insult the ungrateful out of some shameless people, give ya widows might if you can and let em go elsewhere.

    • Nuna

      July 9, 2014 at 4:01 pm

      U should know an ‘agreement’ does not hold much water for Nigerians. And she is very right!!! People love to borrow money but when it comes to paying back, war! I dont even lend anybody money again as I have been burned before. You think the money is easy to make? Abeg shift

    • Uwa

      July 16, 2014 at 2:30 pm

      You write like a child!

    • [email protected]

      August 21, 2014 at 1:32 pm

      madam you sound pained as only a perpetual debtor would..!
      I have loaned friends money and not gotten my money back, we don write agreement sef and the money came in trickles that it was useless to me by the time it was completely paid.
      Now i dont lend out money , i only contribute what i can afford.

    • spoonfullofsugar

      September 4, 2014 at 10:55 am

      @”get an agreement to shield you”, You’re still going to pay money to enforce that agreement.

  2. Miss Pynk

    July 9, 2014 at 10:50 am

    Many people don’t understand their bottom-line and self drivers. Emotional maturity and emotional intelligence go hand in hand with financial/ fiscal responsibility. Thats where the line is drawn between wants and needs. Most people dont realise that fulfilling a want only fills an extremely temporary desire. Let me not get too preachy, but many emotionally poor people struggle to appear richand often in an attempt to do so end up screwing themselves and others.

  3. Lolly

    July 9, 2014 at 11:43 am

    i totally support the writer. I have stopped lending people money, friends inclusive. instead i give what i can afford to forget. some people can be very insensitive and wicked…they will promise to pack back and swear by their father’s name when they want to borrow….when its time to pay back, its becomes a problem…

  4. Busarni

    July 9, 2014 at 12:00 pm

    Madam, she has a right to her own opinion. Na wah for you ooh, i’ m your sibling and i ask you to borrow me money, next thing i see is an agreement i am suppose to sign. Seriously, na you wicked pass. Bottom line, lend what you can forget. Dont come brandishing a paper infront of me cos i want to borow money from you; for what ?

  5. madam

    July 9, 2014 at 12:34 pm

    this attitude is completely evil,,it gives room for impediment and stagnation.
    borrowing what u can forget is not borrowing…it is called giving or better still “dash”.

    I have friends n siblings owing me ,,,but i dont fret and i will still lend to people if i have, if i find them credible enough and if i feel like it.

    • Nuna

      July 9, 2014 at 4:03 pm

      Ehen good for you naa. Maybe you have millions you can afford to forget. We dont. So we have to be wise with the little we have.

    • Uwa

      July 16, 2014 at 2:34 pm

      @madam,please it isnt by force to agree with the writer. she has spoken from experience and i am sure a lot of Nigerians has had similar experience so please allow the people that want to learn from this write up to learn. if you dont agree or like spending your money anyhow,that is your business.


    July 9, 2014 at 12:56 pm

    Don’t hate on the writer, she’s just expressing her opinion and probably seen herself in such situations where the borrower just refuses to pay.
    It really hurts sometimes when closed ones refuse to pay their debts though. They will now claim, “are we not friends again” or “we are family nau”
    Psalms 37:21- “The wicked borroweth, and payeth not again…”

  7. Fume

    July 9, 2014 at 1:21 pm

    I came to this same conclusion this year. So on Point!

  8. Berry Dakara

    July 9, 2014 at 1:51 pm

    I don’t think the author is wicked if she has decided for herself not to lend money to friends anymore. It’s her prerogative. I too don’t lend any money out that if it never came back, I’d be upset over. I’ve been burned myself. How can you be going on vacay when you know you owe me over $600?!?!?!

  9. Agreed.

    July 9, 2014 at 2:00 pm

    I agree with the writer. People always think they’re more important than the next person and somewhere in their minds believe that if you have the money to lend, you have more where it came from. But we all know that sometimes you give your last just because the person seems in dire straits; hoping that they’ll make good their promise and give it back when they said they would so you in turn can fulfill your financial obligations with your money. But do they? Nope!

    So since wisdom is profitable to direct – only lend what you can afford to lose. I wish I knew this earlier cos I have relationships that have never gone back the way they were because of things like this. People don’t think you have your own needs because you’re always there for them financially and unfortunately they abuse it…many perpetually so.

    Welldone Arese.

  10. Created Woman

    July 9, 2014 at 3:32 pm

    as for me I don’t borrow but my ex is begging me to borrow him like 1500 usd to help prepare for his wedding in September
    and am tempted to break the rules and borrow him though

    • The Generous Economist

      July 9, 2014 at 4:33 pm

      my face is like… HUH!!… ur ex is asking to borrow money for his wedding…. “IN MY OPINION”.. dts jst wrongggg on all levels.. still dont know why people borrow to do celebratory tins.. its a wedding..u go into debt to marry den aft garri go dey ur front… sheeshh!!!… like my pastor once sed… wen his wife gave birth to their first child..nd they were not financially buoyant, he tld his wife they will name their child witout any ceremony.. ani1 they invited.. they gave pure water.. shebi wheda or nt u cme..their child will still have name.. abeg.. its jst irresponsible..

    • Olanma

      July 9, 2014 at 7:57 pm

      Wow. He has no shame!

    • Berry Dakara

      July 10, 2014 at 1:30 pm

      Wait, what?!

  11. Nuna

    July 9, 2014 at 4:07 pm

    First of all, its ‘lend him’
    Secondly, can you afford to forget 1500 USD? Because when e go start now….

  12. Agreed.

    July 9, 2014 at 4:38 pm

    OMG! That’s soooo wrong! Good thing he’s your ex…borrow money from someone you used to date to marry another…na real wa. What happened to small scale weddings & cutting your aso ebi according to your Ankara?

  13. Miss Mo

    July 10, 2014 at 5:11 am

    I literally burst out laughing at this Created Woman.
    I mean are you serious?
    Lend your ex money to marry another woman? Lmaooo…
    The fact that you are even considering it means you are prolly still sleeping with him.
    Geez let go, he’s getting married.


    July 10, 2014 at 9:58 am

    Shoot me, but, I agree with the author 100% – I have been burnt by a lot of people in the past. I remember lending a significant amount of money to one of my colleagues because the woman and her husband had this project they ‘needed’ to complete in far away Zimbabwe. She proposed to pay me back the following month but she never did (It’s been over 3 years and she is yet to pay). Also, I remember lending an ex boy friend some money because his money was poorly, therefore she needed treatment (I never even met his mother) – Guess what? The dude hasn’t paid back the money. In the future, I’m not going to lend people money unless I’m prepared to forget about it.

    Someone gave me the best advice ever. Advice – Only be kind to those who deserve it – harsh but true!!!!!!!!!!!!!!


    July 10, 2014 at 9:59 am

    *sorry I meant she promised to pay me back

  16. neon

    July 10, 2014 at 9:59 am

    i just wish she would send this article to some of her ‘friends’ *cough*

    • kemi

      July 10, 2014 at 8:33 pm

      you are a very big fool

    • neon

      July 11, 2014 at 6:18 am

      and this is the problem with people.. i am going to assume you are on of said ‘friends’ As you were.

  17. winnie

    July 10, 2014 at 11:38 am

    I totally agree with d writer, I’m facing same problem right now. Won’t lend again except it’s dash $ something I can easily forget if they refuse to pay back

  18. Fabulicious

    July 10, 2014 at 3:06 pm

    I almost threw up my food.Whaaaat????A shameless man indeed and to all you men proposing up and down.If you don’t have money to wed,better chill ooooo.My dear, you better keep your money ooo.Some men are real manipulators.

  19. frances

    July 11, 2014 at 11:10 am

    I agree with this writer a 100percent!
    Most people-“friends” included actually interprete borrowing to be “dash”. They won’t pay you back and will insult you on top of it. To save heartache, borrow only the one you can afford to dash. Infact as you lend it out, just tell the person it’s for “dash”, you lend the large sums of money and story enter,na problem.

    And I don’t know how people can read something and interprete another thing. The writer is not against buying cars, she is advising us (which is a pretty good advice by the way) to not use debts to get liability. If you must have debts, use it to build your wealth, your business. Get assets not liability..anybody remembers “rich dad poor dad” yet? These are things that lives will be better for, don’t owe cuz of brazillian hair..stay in your lane, increase your earning power, you do that really well then you won’t need to starve your driver cuz you want to go on a trip to dubai…
    Thanks for this write up!

  20. oj

    October 3, 2014 at 4:38 pm

    madam is probably onigbese, that’s why she’s hating the writer

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