The backbone of Nigeria’s economy, comprising millions of micro, small, and medium-sized enterprises (MSMEs), is currently navigating a precarious landscape characterized by stagnant profitability and rising operational overheads. According to the 2025 Informal Economy Report published by Moniepoint, which draws on data from five million businesses and extensive nationwide field surveys, a significant portion of the informal sector remains locked in a cycle of subsistence. The findings reveal that 38% of these enterprises generate less than ₦10,000—approximately $6.78—in daily profit. This statistic serves as a stark indicator that while these businesses provide critical employment and contribute roughly 65% of Nigeria’s GDP, their potential for scalability is being systematically eroded by the current macroeconomic climate.
A Chronology of Economic Pressure
To understand the current state of the Nigerian informal sector, one must look at the timeline of economic shifts that have unfolded over the past 24 months. In June 2023, the Central Bank of Nigeria (CBN) initiated a series of aggressive foreign exchange reforms, moving away from a long-standing regime of controlled rates. This shift was intended to unify the currency markets and restore investor confidence. However, the immediate impact was a drastic devaluation of the naira.
By June 2025, the currency had depreciated from roughly 460 NGN/USD to approximately 1600 NGN/USD. This transition effectively decimated the purchasing power of the average Nigerian entrepreneur, particularly those reliant on imported raw materials or finished goods. By November 2024, the nation faced a 28-year high in inflation, largely driven by the cascading costs of transportation and logistics. For the informal business owner—often operating on razor-thin margins—these inflationary pressures were not merely theoretical; they represented a fundamental breakdown in the cost-to-profit ratio.
The Profitability Paradox
The data provided by Moniepoint highlights a distressing trend: rising revenue does not necessarily translate to a healthier bottom line. While 65% of surveyed informal businesses reported an increase in top-line revenue over the past year, only 47% saw a corresponding rise in profit. This "profit squeeze" is primarily attributed to the 79% of businesses that reported significant increases in their operational costs.
The structure of the sector reveals a heavy reliance on low-margin trade and services. The median daily profit for these businesses currently sits between ₦10,000 and ₦20,000. When this is extrapolated, it becomes clear that for a large segment of the population, these businesses function less as engines of wealth creation and more as a safety net against absolute unemployment. Furthermore, the report indicates that 44% of informal businesses earn less than ₦20,000 in total daily revenue, leaving very little room for reinvestment, emergency savings, or long-term growth.
The Gender Gap in Micro-Entrepreneurship
The survey also illuminates a disparity in the resilience of male-owned versus female-owned businesses. Women, who frequently lead the charge in the informal retail and service sectors, appear to be disproportionately affected by the current economic downturn. The data shows that 41% of women entrepreneurs report daily profits below ₦10,000, compared to 34% of their male counterparts. Conversely, 16% of male-owned businesses earn over ₦50,000 daily, while only 10% of women-owned businesses reach that threshold.
Experts suggest this gap is reflective of systemic barriers, including reduced access to formal financial credit, less availability of collateral for business expansion, and the often-hidden burden of domestic responsibilities that limit the hours and geographic reach of female-led enterprises.
Resilience and the Savings Buffer
The concept of business resilience is perhaps best measured by a company’s ability to withstand a sudden cessation of income. The report notes that 42% of Nigerian businesses possess a savings buffer that would sustain them for only one month or less. This lack of financial cushion makes the sector highly vulnerable to external shocks, such as sudden policy changes or supply chain disruptions.
Interestingly, the behavior of these business owners is shifting in response to these pressures. While borrowing appetite has historically been high, the current environment—defined by high interest rates and stringent lending criteria—has led to a noticeable aversion to debt. Instead, entrepreneurs are relying heavily on cooperatives and digital banking platforms to manage their liquidity. Moniepoint’s data suggests that 74% of informal businesses are currently saving money, a decrease from the 92.4% observed in the previous year, signaling that more capital is being diverted to cover daily operating expenses rather than being set aside for future expansion.
Official Responses and the Need for Policy Reform
Government and industry leaders have begun to acknowledge the structural nature of these challenges. Nurudeen Abubakar Zauro, Technical Advisor to the President on Economic and Financial Inclusion, emphasized that the devaluation of the naira and the subsequent inflation have created bottlenecks in supply chains that threaten the very existence of many SMEs.
"The depreciation of the naira has forced price hikes on imported commodities, reduced purchasing power, and increased costs across the board," Zauro stated. "This has caused many SMEs to become effectively bankrupt and threatens to diminish the overall contribution of the informal economy to the nation’s Gross Domestic Product."
The consensus among analysts is that the era of fragmented interventions is over. Foyinsolami Akinjayeju, CEO of Enhancing Financial Inclusion & Advancement, argues that current policies often fail to address the specific needs of the informal sector. "Government policies must shift from isolated, temporary relief measures to coordinated, systemic strategies that unlock long-term growth," Akinjayeju said.
Toward a Scalable Future
Transitioning from a survivalist model to a growth-oriented one requires more than just capital; it requires capacity. Chinyere Almona, Director-General of the Lagos Chamber of Commerce and Industry, advocates for the integration of informal businesses into formal 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 noted.
For the millions of Nigerians operating within the informal economy, the path forward is difficult. The intersection of global economic forces and local infrastructure challenges has created a bottleneck that inhibits the transition from micro-entrepreneurship to formal business status. However, the persistence of these businesses—despite the 79% increase in the cost of doing business—is a testament to the resilience of the Nigerian spirit.
Implications for the Broader Economy
If the current trend of stagnant profitability continues, the long-term implications for the Nigerian economy could be severe. A sector that contributes 80% of total jobs cannot remain in "survival mode" indefinitely without risking a rise in national poverty rates and a decline in overall consumer spending power. The transition of these businesses into more scalable, profitable, and formal entities is not merely a matter of supporting small businesses; it is a matter of national economic security.
Moving forward, stakeholders are watching to see if the federal government will pivot toward providing better support for local manufacturing to reduce import reliance, or if they will focus on digital infrastructure to help SMEs optimize their costs. Until a comprehensive policy framework is implemented to bridge the gap between revenue and profit, Nigeria’s informal economy will likely continue to struggle under the weight of its own operational burdens. The goal, according to the industry experts cited, must be to turn these survivalist ventures into the engines of a modern, industrialized, and inclusive Nigerian economy.
