Only About 1.3% of Businesses in Nigeria’s Informal Economy Earn Above N2.5 million Monthly – Moniepoint Report

The informal economy plays a crucial role in Nigeria’s daily life, yet much of it remains underexplored. 

As an essential partner in this sector, Nigerian Fintech company Moniepoint which is committed to supporting these businesses to thrive, delved deeper into this sector by speaking to hundreds of business owners and analyzing data from over 2 million businesses across Nigeria. 

Here’s what Moniepoint discovered;

A Youthful Workforce Leading The Informal Economy

Monipoint data reveals that nearly 58% of Nigeria’s informal workforce is under 34 years old. The largest group, constituting 43%, is between 25 and 34 years old. The second largest group, aged 35 to 44, represents 28.9% of the sector in Nigeria. This youthful energy presents a tremendous opportunity for socio-economic transformation through innovation, entrepreneurship, job creation, and wealth generation.

Empowering Women Through Informal Employment

The informal economy also represents a crucial avenue for women’s economic empowerment in Nigeria and across Africa. For every 10 working women in Sub-Saharan Africa, 9 work in the informal economy. Data at Moniepoint shows that women own 37.1% of businesses in this sector. Despite challenges in equity, these data points highlight the importance of the informal economy for women. 

Dominant Sector in The Informal Economy

Retail and General Trade: 

This category leads Nigeria’s informal economy, containing 24% of all businesses. Along with Food & Drinks, Fashion and Beauty, and Agriculture, this category accounts for 58.6% of all businesses in Nigeria’s informal market. By transaction value in Naira, Retail & General Trade, alongside Food & J nks, accounted for over half of Nigeria’s informal economy at 53.6%. This category includes neighborhood shops, restaurants, and supermarkets.

Youthful Ownership

Individuals aged 25 to 34 own the most businesses across industries, accounting for 38.2% of businesses in Retail & General Trade, with nearly half (47.2%) of all business owners in this industry being under 34 years old. Collectively, businesses in the informal market contribute, over half of Nigeria’s GDP. 

Despite this, their actual profit remains modest, with most businesses making less than N250,000 monthly. Only about 1.3% of businesses in Nigeria’s informal economy earn above N2.5 million monthly. 

Gender Disparities

Men are more than twice as likely to earn more in the informal economy compared to women, even though the overall earning potential remains low. Nine out of ten women-owned businesses in the informal economy earn less than N250,000 monthly. 

Notably, about half (51.6%) of business owners cited unemployment as the reason for starting a business. Insufficient income from formal employment was the primary reason for starting a business among women. Despite this, 99.3% of these business owners would continue running their business if they received a gift of N20 million. Passion, although the least common reason for starting a business,

Access to Credit

According to the International Finance Corporation (IFC), 65 million businesses, or 40% of formal micro, small, and medium enterprises (MSMEs) in developing countries, have an unmet financing need of $5.2 trillion annually. In the informal economy, access to credit remains crucial. Moniepoint data reveals that about 70.1% of businesses reported accessing some form of credit for their business.

Source: Moniepoint (Informal Economy Report 2024)

Click on the link to access the report https://lnkd.in/dEX8TusW