A significant portion of Nigeria’s Micro, Small, and Medium-sized Enterprises (MSMEs) are operating in a precarious state, with 38% reporting daily profits below N10,000 (approximately $6.78), according to Moniepoint’s 2025 Informal Economy Report. This finding underscores a critical challenge: the nation’s small businesses, which are the bedrock of its economy, remain largely entrenched in survival mode rather than pursuing sustainable growth and scaling their operations. The report, which draws on data from over 5 million businesses within Moniepoint’s network and supplementary physical surveys across Nigeria, paints a detailed picture of the financial realities faced by the informal sector.
The study indicates that the majority of informal businesses generate daily revenues in the range of N20,000 ($13.56) to N50,000 ($33.89). However, the profitability of these ventures is severely constrained. Beyond the 38% struggling with daily profits under N10,000, a larger segment, comprising 70% of informal businesses, reports earnings below N50,000 ($33.89) daily. The median profit for these enterprises falls even lower, ranging between N10,000 ($6.78) and N20,000 ($13.56) per day. This highlights a persistent squeeze on margins, where revenue generation does not translate proportionally into increased profit.
MSMEs are undeniably the backbone of the Nigerian economy, contributing an estimated 65% to the Gross Domestic Product (GDP) and providing employment for over 80% of the nation’s workforce. Their vital role in economic development and job creation is well-established. However, the report’s findings suggest that persistent and rising operational costs are acting as a significant impediment, preventing these businesses from achieving profitability and, consequently, hindering their potential for expansion and job creation.
The "Survival Check" section of the report poses critical questions about business resilience, revealing concerning trends. A substantial 42% of businesses surveyed reported having a savings buffer sufficient to survive for only one month or less if their income streams were to cease. This indicates a widespread lack of financial resilience, leaving a large number of enterprises vulnerable to unexpected shocks or economic downturns. Compounding this precarious situation, an overwhelming 79% of businesses reported a significant or slight increase in their cost of doing business over the past 12 months. Conversely, only 21% experienced no change or a decrease in their operational expenses.
Further data from Moniepoint’s report indicates that 44% of businesses in the informal economy are currently earning less than N20,000 ($13.56) daily. This overall picture is further exacerbated when examining the performance of women-owned SMEs, who appear to be disproportionately affected. The report reveals that 41% of women entrepreneurs earn below N10,000 ($6.78) daily, a higher proportion compared to the 34% of men-owned businesses facing the same profit threshold. Moreover, men-owned businesses demonstrate a greater capacity for higher earnings, with 16% reporting daily profits exceeding N50,000 ($33.89), significantly outperforming the 10% of women-owned businesses that achieve similar profit levels. This gender disparity in profitability points to potential systemic barriers or unique challenges faced by women in the informal sector.
The Profit Squeeze: A Confluence of Rising Costs and Economic Headwinds
While the past year has seen revenue growth for a majority of informal businesses (65%), the translation of this revenue into actual profit has been considerably less robust, with only 47% experiencing an increase in profits. This disconnect is largely attributable to the escalating cost of doing business. As highlighted, a staggering 79% of these enterprises reported an increase in their operational expenses. The primary drivers behind these cost hikes are multifaceted, including rising supplier prices, increased transportation costs, and the persistent depreciation of the Nigerian Naira.
The economic landscape of Nigeria in recent years has been marked by significant currency volatility. The Naira experienced a dramatic depreciation of approximately 70% in 2024, a consequence of the Central Bank of Nigeria’s decision to relax long-standing foreign exchange restrictions. This policy shift, intended to liberalize the market, has had a pronounced impact on an import-dependent economy. Inflation has consequently surged, reaching a 28-year high in November 2024, largely driven by escalating transportation costs.
Nurudeen Abubakar Zauro, Secretary/Head of the PreCEFI Secretariat and Technical Advisor to the President on Economic and Financial Inclusion, provided a stark quantitative assessment of the currency’s decline. He stated, "The value of the Naira against foreign currencies depreciated from 460 NGN/USD to around 1600 NGN/USD from June 2023 to June 2025." This drastic devaluation has had a cascading effect on businesses, particularly those reliant on imported raw materials or finished goods.
Zauro further elaborated on the implications of this currency depreciation: "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)." The interconnectedness of these economic factors creates a challenging operating environment, where even increased sales may not be enough to offset soaring expenses.
The impact of these rising costs is also evident in the shrinking savings capacity of informal businesses. In the past year, only 74% of these businesses have been able to save money, a notable decline from 92.4% in the preceding year. This reduction in savings capacity directly limits their ability to reinvest in their businesses, cope with emergencies, or pursue growth opportunities.
Despite the challenges, savings remain the primary source of funding for these enterprises. Cooperatives and digital banking platforms continue to be the preferred channels for savings. The allocation of these savings primarily targets business expansion (41%) and the procurement of goods (24%). The growing need for funding is further underscored by an increasing borrowing appetite, albeit tempered by higher interest rates and more stringent lending conditions. Moniepoint’s analysis suggests that "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."
A Call for Systemic Policy Reform
The findings of Moniepoint’s 2025 Informal Economy Report underscore an urgent need for a fundamental shift in government policy. Experts and industry leaders are advocating for a move away from fragmented, ad-hoc interventions towards coordinated and systemic measures designed to foster sustainable growth and financial inclusion within the informal sector.
Foyinsolami Akinjayeju, CEO of Enhancing Financial Inclusion & Advancement, emphasized the necessity of a strategic policy recalibration. She stated, "Government policies must shift from fragmented interventions to coordinated, systemic measures to unlock growth and inclusion for informal business." This call for a more integrated approach suggests that current policies may not be adequately addressing the root causes of the challenges faced by SMEs.
Chinyere Almona, Director-General of the Lagos Chamber of Commerce and Industry, echoed this sentiment, highlighting the imperative for policies that actively facilitate the transition of informal businesses from a survivalist mindset to a growth-oriented trajectory. "If informal businesses are to evolve into growth-oriented employers, policies must deliberately target their transition from survivalist enterprises to scalable ventures," Almona remarked. This indicates a need for proactive policy design that supports and encourages upward mobility within the business ecosystem.
A foundational element of such a policy shift, according to Almona, lies in the provision of structured capacity-building programs. These programs, she suggests, should be "embedded within local chambers of commerce and trade associations, to upskill operators in bookkeeping, inventory management, and digital tools." Equipping entrepreneurs with essential business management skills is crucial for enhancing their operational efficiency, financial literacy, and ability to leverage technology for growth. Such initiatives would not only empower individual business owners but also contribute to a more professionalized and competitive informal sector.
The broader implications of the current economic pressures on Nigeria’s informal sector are significant. A thriving informal economy is critical for poverty reduction, employment generation, and overall economic stability. When a substantial portion of these businesses are stuck in survival mode, it limits their potential to contribute more meaningfully to national development. Addressing the rising cost of doing business, improving access to finance, and providing targeted support for capacity building are essential steps towards unlocking the full economic potential of Nigeria’s vibrant informal sector. The insights from Moniepoint’s report serve as a critical diagnostic tool, urging policymakers and stakeholders to collaborate on implementing comprehensive solutions that foster resilience, growth, and long-term sustainability for the nation’s small businesses.
