Nigeria’s Two-Speed Economy and the Quiet Reinvention of Banking Inclusion
Nigeria’s economy continues to operate across two distinct worlds—one formal and structured, the other informal and fast-moving—often leaving millions of entrepreneurs outside the reach of traditional banking systems. In response to this long-standing imbalance, Union Bank of Nigeria is advancing a more inclusive financial approach, rethinking how creditworthiness is defined and how underserved communities can access financial services.
At the centre of this shift is a recognition that the country’s banking architecture has historically been designed for predictability. It has favoured salaried workers with verifiable income, documented assets, and stable employment histories—an approach rooted in colonial-era financial systems and refined through post-independence banking structures. While efficient for the formal sector, this framework has struggled to accommodate the realities of Nigeria’s far larger informal economy.
That informal economy is not marginal; it is foundational. Across the country, economic activity is driven by highly adaptive systems that rarely leave formal financial footprints. In Ogun State, cooperative savings leaders manage rotating contribution schemes that sustain entire communities. In Lagos’ Balogun Market, traders cycle inventory daily without traditional credit histories. In northern Nigeria, agro-entrepreneurs navigate seasonal earnings tied to planting and harvest cycles. These actors collectively underpin significant portions of national productivity, yet remain structurally misaligned with conventional banking requirements.
This disconnect has created what analysts describe as an “inclusion gap”—not outright exclusion, but a mismatch between how people earn and how financial systems assess creditworthiness. Data from Enhancing Financial Innovation & Access (EFInA) shows that about 26 percent of Nigerian adults were still financially excluded as of 2023. The World Bank also continues to identify limited access to finance as a persistent constraint for small and medium-sized enterprises, particularly those operating informally.
The underlying issue is increasingly understood as one of design rather than intent. Traditional banking systems rely on collateral, salary slips, and formal records as gatekeeping mechanisms. However, for millions of entrepreneurs whose income patterns are cyclical, network-based, and informal, these requirements often fail to reflect economic reality.
This structural gap is now prompting gradual experimentation within the financial sector. One institution actively responding is Union Bank of Nigeria, which has introduced an inclusion-driven initiative known as alpher. The programme is designed to move beyond collateral-based lending and instead assess creditworthiness through cash-flow behaviour, participation in economic networks, and ecosystem-driven indicators of financial activity.
In practical terms, the approach reflects a shift toward recognising how informal businesses actually function. Rather than fixed documentation, the model evaluates trading patterns, cooperative participation, and financial behaviours that signal reliability within informal systems.
In 2025 alone, the initiative reportedly disbursed over ₦150 million in cash-flow-based loans to entrepreneurs who would typically fall outside traditional lending criteria. Instead of relying on collateral or formal credit histories, the assessments drew on behavioural and ecosystem-based indicators. Within this framework, more than ₦106 million in discounted credit was extended to 71 previously underserved businesses. In addition, over 230 participants benefited from financial literacy programmes, while micro-grants and account onboarding efforts helped integrate first-time users into the formal banking system.
The broader significance of these efforts lies not in scale alone but in methodology. By shifting away from conventional credit scoring models, the programme signals a redefinition of financial trust—one that aligns more closely with the operational realities of informal economies.
This evolution is also reflected in internal institutional developments. Within Union Bank, governance structures show increasing emphasis on inclusion, with women occupying 45 percent of board positions—above regulatory expectations set by the Central Bank of Nigeria. Under the leadership of CEO Yetunde B. Oni, the bank has also implemented workplace policies such as extended parental leave and childcare support, reinforcing a wider institutional commitment to inclusion.
Observers note that governance composition often influences product design, with more diverse leadership structures tending to produce more adaptive approaches to underserved markets. In this context, internal organisational shifts are increasingly linked to external financial innovation.
Despite these developments, the broader challenge remains significant. Nigeria’s informal and semi-formal sectors still account for a large share of economic activity, yet continue to face structural barriers in accessing tailored and affordable financial services. Many existing banking products remain poorly suited to irregular income streams and community-based financial systems.
Addressing this divide will likely require more than isolated pilot programmes. It demands a deeper rethinking of how financial institutions define income, assess risk, and establish trust in environments where formal documentation is limited or absent. The question is not simply how to include informal actors in existing systems, but how to redesign those systems to reflect economic reality as it already exists.
As Union Bank approaches its 109th year of operation, its evolving strategy reflects a broader shift within Nigeria’s financial sector. The future competitiveness of banks may depend not only on their ability to serve established customers, but also on how effectively they integrate the vast informal economy that has long operated alongside the formal system.
In an economy defined by complexity rather than uniformity, the institutions best positioned for the next phase of growth may be those willing to redesign themselves around that complexity—bridging two economic worlds that have long functioned in parallel, but not in partnership.