As Nigeria grapples with economic challenges, many are turning to Ajo — a community savings system rooted in trust and tradition.
For traders and low-income earners, it’s a lifeline, providing lump sums of cash for projects and urgent needs. But without regulation, Ajo users risk losing their savings to fraud.
Trader Tessy Ajakaye, 50, is one of the millions of Nigerians relying on Ajo. For her, it’s more than just a savings tool — it’s the backbone of her business. Ajakaye contributes daily, knowing her payout later will help expand her inventory.
In the Ajo system, participants make cash contributions daily or weekly to a money holder as part of a savings program. Each participant gets a periodic lump sum that can be used for business needs.
"Ajo means small, small savings that you don't take to the bank," she said. At year's end, she collects those amounts from Ajo, and "I use it for next year to boost my business. When you take a loan, you pay back with interest. But Ajo, this is your money. What you save is what they give to you."
Ajo isn’t without its risks. Rose Ojoma, another trader, lost her savings to a fraudulent collector during a festive period — a common problem with unregulated schemes.
Ojoma said unscrupulous collectors have taken her money during the Christmas season. Some, she said, will take a month's worth of contributions "as an opportunity to run away, and you cannot find them." She said that as a result, she contributes less to reduce her risk.
Ajo, a Yoruba term for thrift or microsavings, has existed for generations in Nigeria and across Africa under names like Esusu and Adashe. It thrives in low-income communities, offering a simple way to save and access funds without banks.
Economist Jide Ojo said Ajo fills the gap for Nigerians excluded from formal banking systems. He said Ajo is simple and helpful because it lets contributors do projects or access services much easier with their savings. He said it also helps them to be prudent in their spending, because it's a way of putting something aside, rather than using all your income.
But the lack of regulation leaves participants vulnerable.
Development economist Hauwa Mustapha acknowledges the system's benefits, but he is calling for reforms to improve security.
"The government does not have any role directly to protect informal savings schemes," Mustapha said. "The informal savings scheme, as it is, is informal, it's personal, it's about your choice, it's voluntary. I think it will be important, if they can be very well educated and enlightened, to understand how to put some legal form into the concept of Ajo, so that can help to secure the funds more. And I also think that the banks can become more flexible and adopt that principle of Ajo into the bank."
Despite its flaws, Ajo remains a lifeline for millions in Nigeria’s informal economy.
Experts say that by blending tradition with regulation, Ajo could become a safer and more powerful tool for financial stability in Nigeria’s challenging economy.
