The Relationship between the Informal and Formal Financial sector in Nigeria: A Case Study of Selected groups in Lagos Metropous

This paper investigates the links between the informal and the formal financial sectors in Nigeria. The objectives are two folds. The first is to ascertain the deposit and credit links between the informal and the formal financial sectors of the economy. The second objective is to determine the strength and significance of such links between informal and formal financial institutions with respect to saving mobilization and the process of credit dispersion in the informal sector. To realize these twin objectives, the study focused on moneylenders and savings & credit associations in the informal and semi-form al financial sectors in Nigeria. The study employed primary data, which is obtained through random sampling of the various association and groups in the informal financial sector of the economy such as moneylenders, rotational savings and credit associations, traditional mutual aid groups, credit & thrift societies and semiformal savings organizations within Lagos metropolis. The data was analyzed using descriptive and analytical techniques. We find that there is a strong link between the formal and the informal financial sector on the savings side but there is a weak link between the formal and the informal financial sectors on the credit side in Nigeria. We recommend government should put policy measure in place that will ensure their access to more capital as this will assist to facilitate rapid industrialization of the nation. And banks should remove the stringent conditions and excessive documentation that discourage operators in the informal sector to seek for loans in the bank