By Dr. Oluwaseun Adeoye Oyebamiji
Across the country, Nigerians pool money in rotating savings groups: esusu or ajo among Yoruba speakers, adashe in Hausa, isusu in Igbo. Members contribute on a fixed schedule and each takes the pot in turn.
There is no collateral, no credit bureau and no recourse to court. Enforcement rests on reputation and social proximity rather than on security or litigation. That is a description of how the institution works rather than a claim about default rates, since reliable national data on informal group performance is scarce. These arrangements are informal and community-governed, operate largely outside financial regulation, and have persisted for generations.
Set that beside the formal system. The Manufacturers Association reports prime lending rates averaging 24.4 per cent as of March 2026, with maximum rates reaching 33.8 per cent at some banks, and credit to manufacturing falling from N10.88 trillion in February 2024 to N6.6 trillion by December 2025.
That decline is a nominal figure and should be read with care, since inflation over the same period was substantial and classification changes can affect the series. Even allowing for all of that, the direction of travel is not in dispute among the firms living with it.
The contrast people draw is illustrative rather than measured, but it is recognisable. A trader can often raise a modest sum from her savings group faster than she can raise a larger sum from a bank, and she can do it without documents she does not have.
Nigerians did not choose informal finance out of nostalgia. They chose it because it is available, cheaper, familiar and far lighter on paperwork.
Ayittey’s reading of indigenous institutions treated arrangements of this kind as evidence rather than folklore. He argued that decentralised, voluntary and privately enforced economic institutions were normal in African societies long before development economists arrived, and that they persisted because they worked.
On that reading, the rotating savings club is not merely a symptom of exclusion. It is a functioning market that formal institutions have failed to outcompete.
The limits are severe, and romanticising them does real harm. A savings group cannot finance a factory, cannot lend for ten years and cannot diversify risk beyond the people in the room. The pot arrives when your turn comes rather than when the opportunity does, and its size is bounded by what the group can spare.
Its enforcement mechanism stops at the edge of acquaintance, because reputation disciplines only those who expect to meet again. Every feature that makes the group trustworthy also keeps it small.
A country cannot industrialise on rotating credit.
So the pertinent question is why the formal alternative costs as much as it does.
Part of the answer is monetary and should ease as inflation moderates. The Monetary Policy Committee reduced its rate from 27.5 per cent to 26.5 per cent in May 2026, which is a step down from a high base rather than a change of regime.
Part is the state’s own borrowing. When government paper offers high and effectively risk-free returns, banks have limited reason to underwrite a shoe factory in Aba, and every private borrower must clear a hurdle rate the state has set.
Part, though, belongs to a different argument entirely. A Nigerian lender often faces borrowers whose land is untitled, whose security may be difficult to enforce and whose disputes will move slowly through court.
That does not make banks timid. It makes them rational.
Expensive credit is partly a symptom of weak property rights and slow enforcement, which means that reforming the land registry does more for lending than any exhortation to banks.
The counterargument is that government must borrow to build roads, schools and security, and a state that cannot borrow cannot function. That is true. The issue is the scale, the price, and whether the resulting spending becomes visible as the infrastructure private firms need.
If public borrowing produced ports that cleared cargo in days, the crowding out would at least have purchased something.
Practical steps exist. Make the movable collateral registry established under the Secured Transactions in Movable Assets Act 2017 work in practice, so that stock, equipment and receivables can secure lending where land cannot.
Reduce the cost of perfecting title, so that property becomes bankable rather than merely owned. Extend credit information to informal borrowers, since a woman with years of clean contribution history in a savings group has a repayment record that no bank can currently read.
A repayment history is what lets a lender price risk instead of guessing at it.
None of this requires a new institution. It requires the machinery that already exists to work.
Nigerians never needed instruction in saving, lending or pooling risk. The failure is not cultural. It is that the formal system has not yet given them a reason to switch.
Dr. Oluwaseun Adeoye Oyebamiji is a development economist and agricultural policy researcher whose work examines food security, poverty, markets, agricultural policy and economic development, particularly in Africa. His research combines empirical evidence with policy analysis to examine contemporary economic and development issues.
Sources
Secured Transactions in Movable Assets Act 2017, establishing the National Collateral Registry.
Manufacturers Association of Nigeria, June 2026: prime lending rates averaging 24.4 per cent as of March 2026; maximum lending rates of 33.8 per cent at some banks; credit to manufacturing falling from N10.88 trillion in February 2024 to N6.6 trillion by December 2025, a nominal series not adjusted for inflation or classification change.
Central Bank of Nigeria Monetary Policy Committee, May 2026: Monetary Policy Rate reduced from 27.5 per cent to 26.5 per cent.
Esusu, ajo, adashe and isusu as documented Nigerian rotating savings and credit associations.
Focus: that rotating savings groups constitute a functioning credit market with a structural ceiling rather than merely evidence of exclusion; that expensive formal credit is partly a symptom of weak title and slow enforcement rather than of bank timidity; and that the comparison between what a trader can raise informally and formally is illustrative rather than measured. Ayittey on decentralised indigenous institutions, offered as his interpretation.