A century in the same conversation: what Union Bank has learned from banking Nigerian SMEs

Small and medium-sized enterprises in Nigeria operate in a space defined by constant disruption.

Markets shift quickly, customer behaviour changes without warning, and costs rarely stay still. In that kind of environment, the value of a financial institution is measured not by the breadth of its product list but by how well it understands the rhythm of real business life.

For more than a century, Union Bank of Nigeria has occupied that space. Established in 1917 as Colonial Bank, the institution has grown alongside Nigeria’s economic evolution, adapting through different eras of trade, regulation, political change, and technological reinvention.

What has remained consistent is its engagement with the businesses that form the working core of the economy, particularly small and medium-sized enterprises.

That long presence is not offered here as nostalgia. It is offered as context. In a market where many institutions are still learning how to serve smaller businesses well, an unbroken century of working alongside enterprises at every stage of growth, struggle, and reinvention amounts to more than tenure. It amounts to perspective.

The shape of the sector

To understand why that perspective matters, it helps to look at the sector itself.

According to the National Bureau of Statistics, the total number of MSMEs in Nigeria stood at 39.6 million as of 2020, with microenterprises making up 96.9 per cent and SMEs 3.1 per cent. The SMEDAN/NBS MSME 2021 Survey Report shows that micro, small, and medium-sized enterprises contribute roughly 46.31 per cent of national GDP, account for 6.21 per cent of exports, employ around 86.3 per cent of the workforce, and represent nearly 96.7 per cent of all businesses in the country. PwC’s 2024 MSME survey adds further texture, with operators consistently identifying weak demand, high energy costs, and limited financial flexibility as their most pressing constraints.

Two things follow. First, Nigeria’s economic story is, in practical terms, the story of its small businesses. Second, those businesses are operating under sustained pressure. Inflation, unstable consumer demand, infrastructure gaps, taxation complexity, and foreign exchange volatility shape almost every operational decision. In that context, the role of a bank shifts. It is no longer simply a place to keep money or borrow it. It becomes part of the operating infrastructure that determines whether a business can absorb a shock, sustain a season, and reach the next stage of its growth.

What banking for SMEs has come to mean

A decade ago, banking for an SME was largely defined by branch access and traditional account ownership. Today, it is defined by functionality. Whether money moves when it should. Whether cashflow is visible. Whether payments clear without disruption. Whether financing is accessible at the moment an opportunity appears, not weeks after it has passed.

Union Bank’s SME approach has evolved in line with that shift. Rather than treating SMEs as a single homogeneous segment, the bank has built around the recognition that a market trader, a logistics operator, and a small manufacturer experience banking very differently. Their cashflow rhythms differ, their financing needs differ, and their tolerance for operational friction differs. Designing for those differences, rather than against an idealised average customer, is what separates banking that supports SMEs from banking that merely serves them.

Engagement at scale

In 2025, Union Bank’s SME engagement reflected the breadth of that approach. The bank supported thousands of SMEs across its network, recorded a meaningful increase in average SME deposits, disbursed billions in SME lending, and reactivated thousands of dormant business accounts.

These figures sit on the surface of something more interesting. Rising deposits suggest stronger business activity and steadier liquidity flow among customers. Reactivated accounts suggest something quieter and arguably more important, namely the return of businesses that had drifted out of formal banking and have now found their way back. Both point to a strengthening relationship between Nigerian SMEs and the formal financial system, with Union Bank as one of the institutions around which that relationship is being rebuilt.

Digital access as continuity, not novelty

One of the most visible shifts in SME banking globally has been the move toward digital-first financial systems. In Nigeria, that shift is even more pronounced because of the pace at which informal businesses are entering the formal economy and the sheer volume of mobile and agent-based activity in everyday commerce.

Union Bank’s digital platforms, including UnionOnline, UnionMobile, and Union360, are part of the bank’s response to that environment. UnionDirect, the bank’s agency banking arm, has extended a network of thousands of agents into rural and underserved communities, reaching places where a branch network alone could never have done the work.

These platforms are designed to let SMEs perform core banking activities, including payments, transfers, account management, and transaction tracking, without the time costs that physical branch dependency imposes. It is worth being precise about what this is for. Digital banking, in this context, is not innovation for its own sake. It is a response to operational reality. SMEs in Nigeria often work beyond conventional hours, serve customers across multiple channels at once, and need financial services to be available the moment they are required. Reliable digital infrastructure is therefore less about convenience and more about continuity.

Financing that fits the business

Among the most persistent challenges Nigerian SMEs face, access to finance remains the most stubborn. Many businesses struggle to borrow not because their models are weak, but because traditional lending structures ask for collateral or paperwork they cannot easily produce.

Union Bank’s lending response has been to widen the range of evidence that counts. Cashflow-based lending, for instance, allows businesses to access short-term funding based on the rhythm of their revenues rather than the value of their assets. For a generation of entrepreneurs who are operationally credible but asset-light, that distinction is the difference between being able to grow and being stuck.

The bank has reinforced this orientation through development finance partnerships. In 2023, Union Bank entered a multi-million-dollar partnership with the International Finance Corporation (IFC), aimed at expanding trade financing and working capital lending for businesses in food, healthcare, manufacturing, and services. Structured under IFC’s COVID-19 Emergency Response Working Capital Solutions Envelope and supported by the IDA Private Sector Window, the facility was designed to keep credit flowing to SMEs at a moment when global and local disruptions had tightened liquidity for many of them. Interventions of this kind matter because supply chain finance, import dependencies, and currency volatility can interrupt operations that would otherwise be perfectly viable.

αlpher and the question of who gets to grow

Access to finance is a necessary part of SME success, but it is rarely sufficient on its own. Networks, mentorship, structured guidance, and entry into the right rooms often determine whether a viable business actually scales.

That recognition sits at the centre of αlpher, Union Bank’s proposition for women-led businesses. αlpher is built on a simple observation: women entrepreneurs in Nigeria face a thicker layer of structural friction than their male counterparts. Lower historical access to credit. Narrower professional networks. A more demanding balance between business and household responsibilities. A financial product on its own cannot resolve those constraints. A combined offer that pairs financial solutions with mentorship, peer networks, and capability-building stands a better chance.

The αlpher approach reflects a wider truth about inclusion in Nigerian SME banking. Inclusion is not principally about access to a bank account. It is about access to the conditions — financial, professional, and informational — that allow a business to grow. Building those conditions, rather than simply offering products against them, is the more demanding form of the work, and it is increasingly what distinguishes serious SME banks from the rest.

What a century has taught

There is a useful question to ask of any institution that claims a long-standing role in a sector. What, exactly, has it learned?

In Union Bank’s case, three things stand out from the present shape of its SME work.

The first is that the SME segment is not a single audience, and treating it as one produces banking that fits no one well.

The second is that infrastructure, both digital and human, matters more than product design because SMEs encounter banks through the friction of their daily operations rather than through brochures.

The third is that inclusion is not a side initiative. It is a posture about who counts as a customer worth designing for, applied consistently across financing, channels, and engagement.

None of these lessons are dramatic. None of them lend themselves to a single headline. However, they are the kind of lessons that only accumulate with time through repeated exposure to the realities of running a business in Nigeria, and they are arguably what an institution that has been in this conversation for more than a hundred years should be expected to know by now.

For Nigerian SMEs, the more useful question is not how long a bank has been around. It is whether what the bank has learned over that time is visible in the way it works today. On the evidence of the last several years, Union Bank of Nigeria’s answer is one worth paying attention to.