A stark reality is confronting Nigeria’s vital Micro, Small, and Medium-sized Enterprises (MSMEs), the bedrock of the nation’s economy. A comprehensive new report, Moniepoint’s 2025 Informal Economy Report, reveals that a significant portion of these businesses, critical engines of national growth, remain entrenched in a survivalist mode, struggling to achieve meaningful profitability and scale. The findings paint a concerning picture of an economic landscape where escalating operational costs are systematically eroding the gains of revenue growth, leaving a vast majority of informal businesses in a precarious financial state.
According to the report, a staggering 38% of Nigerian SMEs are currently generating daily profits of less than ₦10,000 (approximately $6.78 USD). This figure underscores a persistent challenge: despite efforts and apparent revenue increases, the net financial gain for a substantial segment of the informal sector is insufficient to facilitate growth or investment. The study, which drew upon an extensive dataset of five million businesses from Moniepoint’s platform and supplemented this with direct surveys of small business owners across Nigeria, further highlights the prevailing financial constraints.
The data indicates that the majority of informal businesses operate within a daily revenue bracket of ₦20,000 ($13.56 USD) to ₦50,000 ($33.89 USD). However, the profit margins tell a different story. Beyond the 38% earning below ₦10,000 daily, an even more substantial 70% of these enterprises are making less than ₦50,000 ($33.89 USD) in total daily profit. This means that for the vast majority of informal businesses, the daily earnings are barely covering operational expenses and providing a minimal return, leaving little room for reinvestment or expansion. The median profit for these businesses hovers precariously between ₦10,000 ($6.78 USD) and ₦20,000 ($13.56 USD) per day, a figure that is easily wiped out by unforeseen expenses or economic fluctuations.
The implications of these findings are profound, especially when considering the immense contribution of MSMEs to Nigeria’s economic fabric. These enterprises are not merely small players; they are the undisputed backbone of the nation’s economy, contributing approximately 65% to the Gross Domestic Product (GDP) and serving as the primary source of employment, generating over 80% of all jobs. Their struggle for profitability directly translates into a bottleneck for national economic development and poverty alleviation efforts.
The Survival Check: A Looming Crisis for Small Businesses
The Moniepoint report introduces a critical "Survival Check" metric, posing questions designed to gauge the resilience of businesses within the informal economy. The findings from this section are particularly alarming. When asked about their savings buffer, 42% of businesses indicated that their current savings could only sustain them for one month or less if their income ceased entirely. This suggests a widespread lack of financial preparedness and a high vulnerability to economic shocks.
Adding to this precarious situation, the report highlights a significant increase in the cost of doing business. A substantial 79% of businesses surveyed reported a significant or slight increase in their operational costs over the preceding 12 months. This contrasts sharply with the mere 21% who experienced no change, a slight decrease, or a significant decrease in their business expenses. This overwhelming majority facing rising costs paints a clear picture of the immense pressure on informal sector operators.
Further data from the report reveals that 44% of businesses in the informal economy are currently earning less than ₦20,000 ($13.56 USD) daily. This reinforces the earlier findings on low profitability and highlights the pervasive struggle for financial stability within this crucial economic segment.
Gender Disparities in the Profit Squeeze
The report also sheds light on concerning gender disparities within the informal economy, indicating that women entrepreneurs are disproportionately affected by the prevailing economic challenges. A higher percentage of women-owned SMEs, specifically 41%, earn less than ₦10,000 ($6.78 USD) daily, compared to 34% of men-owned businesses. Conversely, men-owned businesses show a greater propensity for higher earnings, with 16% reporting daily profits exceeding ₦50,000 ($33.89 USD), a benchmark achieved by only 10% of women-owned enterprises. This suggests that existing structural barriers and economic headwinds may be more pronounced for women entrepreneurs, hindering their ability to scale and achieve greater financial success.
The Unrelenting Rise in Operational Costs
The core issue identified by the Moniepoint report is the relentless surge in operational costs, which is systematically undermining revenue growth and preventing it from translating into tangible profits. While 65% of informal businesses reported an increase in revenue over the past year, a significantly lower 47% experienced a corresponding rise in profit. This widening gap between revenue and profit is a direct consequence of escalating expenses.
The report attributes these rising costs to several key factors: increased supplier prices, higher transportation expenses, and the weakening of the Nigerian Naira against major foreign currencies. The impact of these factors is not theoretical; it is a daily reality for business owners struggling to maintain their operations.
The Naira’s Descent and its Economic Fallout
The depreciation of the Nigerian Naira has been a major catalyst for the current economic pressures. The currency experienced a dramatic devaluation of approximately 70% in 2024, a direct result of the Central Bank of Nigeria’s relaxation of long-standing foreign exchange restrictions. This policy shift, intended to liberalize the market, has inadvertently fueled import-dependent costs, leading to a surge in inflation. In November 2024, Nigerian inflation reached a staggering 28-year high, primarily driven by escalating transport costs, which directly impact the logistics and supply chains of countless businesses.
Nurudeen Abubakar Zauro, Secretary/Head of the PreCEFI Secretariat and Technical Advisor to the President on Economic and Financial Inclusion in the Office of the Vice President, provided critical context to this economic turmoil. He stated, "The value of the Naira against foreign currencies depreciated from 460 NGN/USD to around 1600NGN/USD from June 2023 – June 2025." This dramatic slide has had far-reaching consequences.
Zauro elaborated on the ripple effects: "This forced price hikes on imported commodities, reduced purchasing power, increased costs and bottlenecks in supply chain networks, logistics and transport, thereby causing many SMEs to become bankrupt and diminishing the contribution of the informal economy to the country’s Gross Domestic Product (GDP)." His statement underscores the systemic nature of the crisis, demonstrating how currency fluctuations can cascade through the economy, threatening the very survival of businesses.
The increased cost of doing business has had a direct impact on the savings capacity of informal businesses. The report indicates that only 74% of these businesses are currently able to save money, a significant decline from 92.4% in the previous year. This reduction in savings capacity further limits their ability to weather economic storms or invest in future growth.
Despite these challenges, when informal businesses do manage to save, their preferred channels remain cooperatives and digital banks. The primary objectives for these savings are typically business expansion (41%) or the procurement of goods (24%). This indicates a persistent desire to grow and reinvest, even in the face of adversity. However, with rising interest rates and more stringent lending conditions, the appetite for borrowing has diminished, making savings the primary, albeit often insufficient, source of funding for operational needs and emergency capital. Moniepoint observes, "Given the aversion to borrowing that has risen in the past year, savings are the primary means by which these businesses access the funding they need to expand their operations or cater to emergencies."
The Imperative for Policy Reform
The findings of the Moniepoint Informal Economy Report necessitate a fundamental re-evaluation of government policies aimed at supporting the MSME sector. Experts are calling for a strategic shift away from fragmented, short-term interventions towards more coordinated, systemic measures that can truly unlock growth and foster financial inclusion for informal businesses.
Foyinsolami Akinjayeju, CEO of Enhancing Financial Inclusion & Advancement, asserts that for informal businesses to evolve from survivalist enterprises into growth-oriented employers, policies must be deliberately designed to facilitate this transition. This requires a proactive approach that moves beyond basic support to actively enabling scalability.
Chinyere Almona, Director-General of the Lagos Chamber of Commerce and Industry, echoes this sentiment, emphasizing the need for foundational support structures. "A foundational step is the provision of structured capacity-building programs, embedded within local chambers of commerce and trade associations, to upskill operators in bookkeeping, inventory management, and digital tools," she suggests. Such programs are crucial for equipping business owners with the essential skills needed to navigate complex economic environments, improve financial management, and adopt modern business practices.
The report’s findings underscore a critical juncture for Nigeria’s informal economy. Without targeted, systemic interventions and a robust policy framework that addresses the root causes of escalating costs and stagnant profitability, the vital contribution of MSMEs to the nation’s economic prosperity remains at risk. The path forward requires a concerted effort from government, financial institutions, and support organizations to empower these businesses to move beyond mere survival and into an era of sustainable growth and development. The potential for job creation, GDP enhancement, and poverty reduction hinges on successfully navigating these formidable challenges.
