The latest Informal Economy Report 2024 by Moniepoint, in partnership with SMEDAN and the Federal Ministry of Industry, Trade & Investment, highlights the immense scale and impact of Nigeria’s informal economy, underscoring its critical role in the nation’s socio-economic fabric and offering a roadmap to unlock its vast potential.
The report reveals that Nigeria hosts approximately 40 million Micro, Small, and Medium Enterprises (MSMEs), with nearly 90% operating in the informal sector. This segment, often overlooked and misunderstood, contributes over 37% of Nigeria’s GDP and provides vital employment, particularly for the youth and women.
Youth and women fueling informal business growth
Moniepoint’s data shows that informal business owners are predominantly young, with 58% under the age of 34, and women owning 37.1% of these businesses. This youthfulness creates opportunities for innovation and economic transformation, while gender representation signals the sector’s role in empowering women economically.
Retail and trade dominate informal sectors
Retail and general trade account for 24% of all informal businesses, followed closely by food and drinks, fashion and beauty, and agriculture — which together represent nearly 60% of the informal economy. Despite high transaction volumes, most informal businesses face challenges maintaining longevity, with eight out of ten being under five years old.
Informal businesses face financial and regulatory hurdles
The report underscores that access to credit remains limited; 70% of informal businesses borrow money mostly from family and friends, while only 12% access traditional banks. This restricts entrepreneurs from scaling their enterprises and formalizing their operations. A significant number prefer cash transactions due to ease and trust issues but are increasingly adopting digital payment methods following the Central Bank’s cashless policy push.
Taxation in the informal sector is mainly through market levies paid to local councils, with 89% of businesses acknowledging some form of tax payment, contradicting perceptions that informal businesses do not contribute to public revenues.
Moniepoint’s role in formalization and financial inclusion
Moniepoint has emerged as a pivotal player in bridging informal businesses to the formal financial ecosystem. By simplifying banking access, streamlining business registration with agencies like Corporate Affairs Commission (CAC), and offering tailored credit products, Moniepoint has onboarded over 2 million informal businesses. Their credit solutions have enabled 30% of informal businesses to access financing for the first time.
Government and agency collaboration vital for growth
The report emphasizes government initiatives under President Bola Ahmed Tinubu’s administration aimed at empowering MSMEs, including accessible loans, regulatory reforms, and skill development programs. SMEDAN’s efforts to formalize informal businesses through training, business clinics, and incentives are highlighted as critical in supporting this large segment of the economy.
A call to action for stakeholders
Moniepoint’s CEO Torin Eniolorunda urges policymakers, private sector stakeholders, and development partners to recognize and invest in the informal economy’s potential. The report stresses that formalization, digital adoption, credit access, and supportive policies can transform millions of informal enterprises into engines of sustainable economic growth.
About the report
The Informal Economy Report 2024 is built on an analysis of over 2 million Moniepoint users, augmented by interviews and surveys of informal business owners nationwide, alongside data from government and international sources. It provides comprehensive insights into the demographics, challenges, financial habits, and digital adoption trends shaping Nigeria’s informal economy.
This data-driven report positions the informal economy not as a shadowy fringe but a vibrant, youthful powerhouse deserving of targeted support and smart integration into Nigeria’s formal economic mainstream. Its success is crucial to national development and poverty reduction in Africa’s largest economy.
