Borrowing from family or a savings group in Nigeria
In Nigeria, lending between individuals relies on family, ajo, esusu or adashe savings groups and cooperatives, while online platforms fall under the SEC or the FCCPC and regular moneylending requires a licence in several states.
Ajo, esusu, adashe: one tradition under several names
The Yoruba speak of ajo or esusu, the Hausa of adashe and the Igbo of isusu. Each member pays a fixed sum at regular intervals and takes the pot in turn, which amounts to an interest-free loan for those served early.
The market ajo collector
In the markets of Lagos, Ibadan or Kano, a collector comes round every day to gather small sums from traders. He returns the savings at the end of the month, minus a commission, and sometimes advances funds to loyal clients.
Workplace and neighbourhood cooperatives
Cooperatives registered with each state's ministry of cooperatives lend to members in proportion to their savings. This model, common in the civil service and universities, often offers better terms than the banks do for the same borrowers.
Lending within the family: put the deal in writing
A family loan is best formalised in a dated document signed before witnesses, stating the amount in naira, the repayment schedule and any interest. A traceable bank transfer is better than a cash payment that is hard to prove.
State money lender licences
Lending regularly at interest without being a bank falls under money lenders laws, such as the one in Lagos State, which require a licence. An individual who makes a habit of it without authorisation is exposed to penalties.
Crowdfunding platforms and the SEC
Since its 2021 rules, the Securities and Exchange Commission has regulated investment crowdfunding for small businesses. A platform that collects public savings in order to lend them must be registered, or it operates illegally.
When digital lending poses as P2P
Some apps present themselves as marketplaces between individuals when in fact they lend their own funds. They then fall under the FCCPC digital lending regulation and must appear on its official register like any other digital lender.
Lessons from Ponzi schemes
MMM Nigeria in 2016 and then the collapse of CBEX in 2025 ruined many savers drawn in by unrealistic returns. A platform promising large monthly gains to those who lend or invest shows the typical signs of a fraudulent scheme.
Disputes and recovery between individuals
When a dispute arises, family or community mediation often comes before the courts. Small claims can be brought before the courts of Lagos or other states, provided there is written proof of the loan to show the judge.
Savings groups versus formal microcredit
Savings group members who want to borrow more turn to microfinance banks, which adopt the principle of joint liability. See the microcredit in Nigeria page for the institutions licensed by the CBN and the products they offer.
Remittances from London and Houston framed as family loans
Money sent by Nigerians in London, Houston or Johannesburg pays for rent, medical bills and small businesses. These transfers, often described as family loans, stay outside the statistics on credit in Nigeria but carry real weight.
Peer-to-peer lending in Sierra Leone
In Sierra Leone, another English-speaking West African country, osusu groups play a role similar to Nigerian ajo within a much smaller banking system. The local picture is described on the peer-to-peer loans in Sierra Leone page.
Setting up a private loan in Nigeria
- Agree the amount in naira, the term and any interest before handing over any money.
- Draw up a written agreement signed by both parties and at least one witness.
- Send the money by bank transfer to keep a record linked to each person's BVN.
- Set the repayment calendar and what happens if a payment is late.
- For a savings group, check the collector's identity and the payout order agreed in writing.
What informal borrowing costs in Nigeria
| Arrangement | Usual cost | Main risk |
|---|---|---|
| Family loan | Often interest-free | Strained relationships if payments are late |
| Ajo or adashe group | Collector's commission, variable | Collector disappearing with the funds |
| Cooperative | Interest set by the by-laws | Depends on sound management |
| Unlicensed lender | Interest often very high | Illegal activity, abusive practices |
Records to keep when lending privately in Nigeria
- Dated and signed written agreement
- Copies of both parties' ID documents
- Bank transfer receipts
- Member list and payout calendar of the savings group
- Cooperative by-laws and passbook
Dangers of informal loans in Nigeria
- Handing your savings to an unknown ajo collector at a market, with no guarantor and no record of payments.
- Investing in a lending platform promising high monthly returns, the classic sign of an MMM or CBEX type scheme.
- Lending large sums in cash without any written record, then being unable to prove the debt before a court.
- Paying fees to a fake investor met on Instagram who promises a personal loan between individuals.
Lenders to contact
- Accion Microfinance Bank: Nigerian microfinance bank lending to micro-entrepreneurs and small businesses, also offering personal loan products such as BrightA MyOwn Loan Plus.
- Federal Mortgage Bank of Nigeria (FMBN): Federal mortgage bank of Nigeria granting National Housing Fund home loans to contributors for buying or building a house.
- Jaiz Bank: Nigeria's first non-interest bank, publicly listed, offering Shariah-compliant accounts and financing to individuals and businesses.
- TAJBank: Second non-interest banking institution launched in Nigeria, providing Islamic banking services to both retail and business customers.
Questions on ajo, esusu and private loans in Nigeria
Can a private individual lend at interest in Nigeria?
A one-off loan between relatives is common. Lending regularly at interest, however, may require a money lender licence issued by the state, as in Lagos. The rule depends on the legislation of each state in the federation.
Are ajo savings groups regulated?
Informal savings groups are not supervised by the CBN. Some digital ajo savings platforms, on the other hand, are backed by licensed microfinance banks. It is wise to confirm that backing before entrusting them with your money.
Is crowdfunding legal in Nigeria?
Yes, the SEC adopted crowdfunding rules in 2021. Platforms must be registered and respect caps on the amounts raised. An unregistered platform that solicits money from the public is in breach of the regulations.
How can you protect yourself from a peer-to-peer loan scam?
Refuse any upfront payment, check the lender's real identity and be wary of promises of loans with no conditions. A serious lender never asks for insurance or release fees before the funds are paid out.