The backbone of the Nigerian economy is currently undergoing a period of intense structural stress, with new data revealing that a significant majority of the nation’s Micro, Small, and Medium-sized Enterprises (MSMEs) are struggling to move beyond a subsistence level of operations. According to the Moniepoint 2025 Informal Economy Report, which synthesized data from 5 million businesses and extensive field surveys, 38% of informal enterprises generate less than ₦10,000—approximately $6.78—in daily profit. This finding underscores a precarious reality: the sector responsible for 65% of Nigeria’s GDP and over 80% of its employment is operating in a perpetual state of survival, lacking the financial cushion necessary for scaling or long-term investment.

A Landscape of Diminishing Returns

The report paints a stark picture of the current fiscal environment for small-scale entrepreneurs. While gross revenue figures might initially suggest a level of market activity, the conversion of that revenue into net profit is being aggressively cannibalized by inflationary pressures. The data indicates that while most informal businesses generate daily revenues between ₦20,000 ($13.56) and ₦50,000 ($33.89), the median daily profit sits at a razor-thin margin of ₦10,000 to ₦20,000.

Perhaps most telling is the divergence between revenue and profit. Although 65% of surveyed businesses reported an increase in revenue over the past year, less than half—47%—saw a corresponding increase in profit. This "profit squeeze" is the direct result of a 79% surge in the cost of doing business, driven by higher supplier prices, volatile logistics costs, and the rapid depreciation of the naira.

Chronology of the Economic Shift

To understand the current crisis, one must look at the timeline of the recent macroeconomic shifts that have defined the Nigerian business landscape.

The primary catalyst for this systemic shock was the mid-2023 policy pivot by the Central Bank of Nigeria (CBN). By relaxing long-standing foreign exchange restrictions, the government effectively allowed the naira to find its market value, leading to a depreciation from approximately 460 NGN/USD in June 2023 to nearly 1,600 NGN/USD by mid-2025.

This devaluation hit the informal economy with immediate, compounding effects:

• Late 2023: Initial inflationary spikes began to erode the purchasing power of the average consumer, forcing SMEs to either absorb rising costs or pass them on to customers, the latter of which led to a decline in sales volume.
• Early 2024: Supply chain bottlenecks intensified as import-dependent businesses struggled to secure foreign currency for raw materials and finished goods.
• Late 2024: Inflationary rates reached a 28-year high, largely driven by the high cost of transportation and energy, effectively nullifying the gains of those who had managed to increase their revenues.
• Early 2025: The current report reflects the "survivalist" reality, where business owners have largely abandoned growth-oriented strategies in favor of liquidity management and basic operational continuity.

The Gender Gap in Financial Resilience

The report also highlights a troubling disparity in economic resilience based on gender. Women-owned SMEs, which form a vital part of the informal retail and service sectors, are statistically more vulnerable. The data shows that 41% of women-owned enterprises earn less than ₦10,000 daily, compared to 34% for their male counterparts. Conversely, 16% of male-owned businesses are able to achieve daily profits exceeding ₦50,000, while only 10% of women-owned businesses reach that threshold.

This gap is often attributed to systemic barriers, including unequal access to capital, limited mentorship networks, and a higher propensity for women to operate in low-margin sectors like petty trading, which are more susceptible to supply chain fluctuations.

Official Perspectives and Economic Implications

The government’s response to these findings highlights the difficulty of balancing macroeconomic reform with the realities on the ground. Nurudeen Abubakar Zauro, Secretary and Head of the PreCEFI Secretariat and Technical Advisor to the President on Economic and Financial Inclusion, acknowledges the gravity of the situation.

"The depreciation of the naira from 460 NGN/USD to 1600 NGN/USD has forced price hikes on imported commodities and reduced purchasing power across the board," Zauro noted. "These bottlenecks in supply chains and logistics have caused many SMEs to face the prospect of bankruptcy, which directly threatens the informal economy’s contribution to our Gross Domestic Product."

The implications are clear: without deliberate intervention, the sector faces a "hollowing out" effect. When businesses are forced to operate solely on a survival basis, they cease to be innovators or engines of employment. They instead become reactive, prioritizing short-term cash flow over the long-term investment in technology, inventory, or human capital that is required for a modernizing economy.

Strategies for Survival: Savings over Borrowing

The report reveals a significant change in how these businesses approach financing. Due to high interest rates and increasingly stringent lending requirements from commercial banks, the appetite for formal credit has waned. Instead, businesses are relying heavily on personal savings to bridge gaps.

However, the ability to save has been severely hampered. Only 74% of informal businesses are currently saving money, a sharp decline from the 92.4% recorded in the previous year. For those who are able to save, cooperatives and digital banks have become the primary vehicles. These funds are rarely used for innovation; rather, 41% of businesses direct their savings toward basic business expansion, and 24% use them strictly to restock goods.

The Path Toward Structural Reform

Experts argue that the current model of fragmented, piecemeal interventions is insufficient. Foyinsolami Akinjayeju, CEO of Enhancing Financial Inclusion & Advancement, suggests that the government must move toward a coordinated, systemic approach. The goal, according to Chinyere Almona, Director-General of the Lagos Chamber of Commerce and Industry, must be to facilitate a transition from "survivalist" to "scalable."

"A foundational step is the provision of structured capacity-building programs, embedded within local chambers of commerce and trade associations," Almona stated. By upskilling operators in essential areas such as digital bookkeeping, inventory management, and financial literacy, the state could help these businesses navigate the complexities of a volatile market.

Furthermore, the integration of digital tools is cited as a potential equalizer. Businesses that utilize digital financial services are often better positioned to track their cash flows, build credit histories, and participate in the broader formal financial system. However, for these tools to be effective, they must be paired with an environment that rewards formalization rather than penalizing it with excessive taxation or regulatory burdens.

Broader Impact on National Stability

The stagnation of the informal sector has ramifications that extend beyond GDP statistics. In a country where the informal economy provides the vast majority of jobs, the inability of these businesses to scale is a primary driver of youth unemployment and social instability. When small businesses fail, the impact is felt immediately in households that rely on daily, micro-level earnings to survive.

As Nigeria navigates the remainder of 2025, the findings from the Moniepoint report serve as a definitive call to action. The era of assuming the informal sector will "simply survive" is over. Policy makers, financial institutions, and private sector stakeholders must collaborate to lower the cost of doing business, provide sustainable credit, and build the capacity of the millions of entrepreneurs who hold the country’s economic future in their hands. The data is clear: without a shift from a survival-centric model to a growth-oriented one, the engine of the Nigerian economy risks stalling completely.