The heartbeat of Nigeria’s economy is currently struggling to maintain a pulse, as new data reveals that the nation’s Small and Medium-sized Enterprises (SMEs) are increasingly confined to a cycle of mere survival rather than sustainable expansion. According to the Moniepoint 2025 Informal Economy Report, which analyzed data from 5 million businesses and conducted extensive on-the-ground surveys, a staggering 38% of Nigerian SMEs generate less than ₦10,000—approximately $6.78—in daily profit. This sobering statistic underscores a systemic crisis: while these enterprises are responsible for 65% of the nation’s Gross Domestic Product (GDP) and provide over 80% of total employment, their capacity to scale is being systematically eroded by an unforgiving macroeconomic environment.

The findings paint a picture of a sector under intense pressure. While most informal businesses report daily revenues between ₦20,000 ($13.56) and ₦50,000 ($33.89), the profit margins tell a different story. Nearly 70% of these businesses earn less than ₦50,000 in profit daily, with the median profit sitting precariously between ₦10,000 and ₦20,000. For millions of Nigerians, these businesses represent their primary source of livelihood, yet the narrowing gap between revenue and operational expenditure threatens the long-term viability of the entire informal sector.

A Chronology of Economic Strain

To understand the current predicament, one must look at the timeline of the Nigerian economic shift over the past 24 months. The period between June 2023 and June 2025 has been defined by a series of radical fiscal adjustments that have fundamentally altered the landscape for small business owners.

In June 2023, the Central Bank of Nigeria (CBN) moved to unify the foreign exchange market, effectively floating the naira. This policy shift, intended to remove arbitrage and stabilize the economy in the long run, triggered an immediate and sharp depreciation of the currency. The naira slid from approximately 460 NGN/USD to a staggering 1,600 NGN/USD by mid-2025.

For the average informal business, which is often reliant on imported raw materials or finished goods, this devaluation acted as a massive tax on operations. As import costs skyrocketed, businesses faced a difficult choice: pass the costs on to a consumer base already struggling with diminished purchasing power or absorb the costs and watch profit margins evaporate. By November 2024, the cumulative effect of these pressures, combined with soaring transportation and energy costs, pushed Nigeria’s inflation to a 28-year high, creating a "cost-of-doing-business" crisis that has yet to abate.

Gender Disparity in the Profit Gap

The Moniepoint report further highlights a concerning gendered dimension to this economic downturn. Women-owned enterprises are disproportionately affected by the current volatility. The data indicates that 41% of women entrepreneurs operate on daily profits of less than ₦10,000, compared to 34% of their male counterparts. Conversely, 16% of male-owned businesses manage to generate daily profits exceeding ₦50,000, while only 10% of women-owned businesses reach that threshold.

This disparity is often attributed to structural barriers in access to finance, market networks, and digital literacy. As the informal sector becomes increasingly digitised, the "digital divide" remains a critical hurdle for women entrepreneurs, who may have less access to the credit facilities and formal banking tools required to navigate the current inflationary environment.

The Profit Squeeze: Revenue vs. Reality

A paradoxical trend identified in the 2025 report is that revenue growth does not automatically translate to profitability. While 65% of informal businesses recorded an increase in revenue over the last year, only 47% saw a corresponding increase in profit. This disconnect is the primary indicator of a "system shock." Nearly 79% of surveyed business owners pointed to a significant increase in the cost of doing business, citing three primary culprits: escalating supplier prices, prohibitive transport logistics, and the weakened naira.

The impact of these costs is visible in the savings behavior of the sector. In the previous fiscal year, 92.4% of informal businesses reported the ability to save a portion of their earnings. Today, that number has dropped to 74%. When businesses cannot save, they cannot reinvest, and when they cannot reinvest, they cannot graduate from the informal sector to become formal, scalable entities.

Official Perspectives on the Economic Climate

The government has acknowledged the gravity of these findings. Nurudeen Abubakar Zauro, Secretary/Head of the PreCEFI Secretariat and Technical Advisor to the President on Economic and Financial Inclusion, noted that the rapid depreciation of the naira has acted as a catalyst for business failure. "This forced price hikes on imported commodities, reduced purchasing power, and increased bottlenecks in supply chain networks," Zauro stated. "It has caused many SMEs to become bankrupt, thereby diminishing the contribution of the informal economy to the country’s GDP."

The consensus among economic experts and policy advisors is that the current model of fragmented intervention—often characterized by ad-hoc grants or short-term relief—is insufficient. Foyinsolami Akinjayeju, CEO of Enhancing Financial Inclusion & Advancement, argues that there is an urgent need for systemic measures. "Government policies must shift from fragmented interventions to coordinated, systemic measures to unlock growth and inclusion for informal businesses," she remarked.

Implications for Future Policy

The challenge facing policymakers is twofold: how to stabilize the immediate environment to prevent further business closures, and how to create a pathway for these survivalist enterprises to scale. Chinyere Almona, Director General of the Lagos Chamber of Commerce and Industry, emphasizes the need for capacity building. "If informal businesses are to evolve into growth-oriented employers, policies must deliberately target their transition from survivalist enterprises to scalable ventures," Almona said. She advocates for a foundational strategy that embeds structured capacity-building programs—such as bookkeeping, inventory management, and digital literacy—within local chambers of commerce and trade associations.

Furthermore, the data suggests a growing "aversion to borrowing." Because interest rates have risen and lending conditions have become more stringent, small business owners are increasingly wary of traditional debt. Instead, they are turning to cooperatives and digital banks as their preferred financial partners. This trend highlights the importance of micro-savings platforms as a primary vehicle for capital formation in the absence of affordable credit.

Conclusion: The Path Ahead

The 2025 Informal Economy Report serves as a critical diagnostic tool for the Nigerian government and stakeholders. It confirms that while the informal sector remains the backbone of the nation’s economic output, its structural integrity is weakening. Without a concerted effort to address the high costs of logistics, provide accessible credit, and foster digital capacity, the "survival mode" described by the report could become a permanent feature of the Nigerian entrepreneurial landscape.

The resilience of these 5 million businesses is not infinite. As the nation looks toward future growth, the focus must shift from merely acknowledging the importance of SMEs to actively dismantling the barriers that prevent them from thriving. The transition from informal survival to formal growth is not just a goal for individual entrepreneurs; it is a macroeconomic necessity for the stability and prosperity of Nigeria. Whether through targeted tax relief, improved infrastructure to lower transport costs, or structured mentorship programs, the time for systemic, long-term policy reform has arrived. The data is clear: the engines of the Nigerian economy are running, but they are currently starved of the fuel needed to move forward.