Moniepoint, a financial technology company, reports that only 1.3 percent of informal businesses in Nigeria earn over N2.5 million monthly.
Informal businesses are those that operate without formal business licenses or government registration, including home-based enterprises, car washes, and street vendors.
In its first publication, ‘The Informal Economy Report 2024,’ Moniepoint revealed findings from interviews with hundreds of business owners and data analysis from over 2 million businesses across Nigeria to gain insights into the country’s informal economy.
The report highlights that the informal sector contributes more than half of Nigeria’s gross domestic product (GDP), with 72.3 percent of these businesses generating monthly revenues exceeding N1,000,000. However, actual profits are significantly lower, with most businesses earning less than ₦250,000 monthly. Only about 1.3 percent of informal businesses earn more than ₦2.5 million monthly.
The report also indicates a gender disparity in income within the informal economy, with men more than twice as likely to earn higher incomes than women. Nine out of ten women-owned businesses in the informal sector earn less than N250,000 per month.
Additionally, 51.6 percent of business owners cited unemployment as their reason for starting a business, while 35.9 percent started their business due to insufficient income from their current job.
The analysis also shows that the south-west region, including Nigeria’s commercial hub, Lagos, has the highest concentration of informal businesses.
Access to credit is vital for these businesses, with 70.1 percent having secured some form of credit. Loans are crucial for restocking, expansion, and sustaining operations during tough times. Credit sources include friends and family (70.7 percent), loan platforms (15.1 percent), and traditional banks (12.2 percent). However, due to past negative experiences, many business owners are reluctant to extend credit to their customers.
