A stark reality is emerging for Nigeria’s vital Micro, Small, and Medium-sized Enterprises (MSMEs), the very engine of the nation’s economy. A significant majority of these businesses are grappling with profitability challenges, trapping them in a cycle of survival rather than fostering growth. Moniepoint’s comprehensive 2025 Informal Economy Report reveals that a staggering 38% of Nigerian SMEs are earning daily profits of less than ₦10,000 (approximately $6.78 USD), painting a grim picture of their financial health and their capacity to scale.
The report, which meticulously combined data from Moniepoint’s extensive network of over 5 million businesses with in-depth physical surveys of small business owners across the country, highlights a critical disconnect between revenue generation and actual profit. While most informal businesses generate daily revenues ranging between ₦20,000 ($13.56 USD) and ₦50,000 ($33.89 USD), the profits often fall far short of a sustainable level. The report further emphasizes this precarious situation, noting that 70% of these businesses earn less than ₦50,000 ($33.89 USD) in daily revenue, and a substantial 44% of informal businesses are bringing in less than ₦20,000 ($13.56 USD) daily. The median daily profit for these enterprises hovers precariously between ₦10,000 ($6.78 USD) and ₦20,000 ($13.56 USD), a figure that barely covers operational necessities, let alone allows for investment in expansion or innovation.
This financial strain is particularly acute for women entrepreneurs. The Moniepoint report details that 41% of women-owned Nigerian SMEs report daily earnings below ₦10,000 ($6.78 USD), a higher proportion than the 34% observed among men-owned businesses. Furthermore, only 10% of women-led businesses manage to earn over ₦50,000 ($33.89 USD) daily, compared to 16% of their male counterparts. This disparity underscores existing gender-based economic challenges within the informal sector, suggesting that women entrepreneurs face even greater hurdles in achieving financial stability and growth.
The backbone of Nigeria’s economic landscape, MSMEs are responsible for an estimated 65% of the nation’s Gross Domestic Product (GDP) and provide over 80% of all employment opportunities. Their struggles, therefore, have far-reaching implications for national economic development and poverty reduction. The current environment, characterized by escalating operational costs, is proving to be a significant impediment, pushing these crucial businesses into a perpetual state of just trying to stay afloat.
The Profit Squeeze: A Deep Dive into Rising Costs
The findings of the Moniepoint report paint a clear picture of an economy where revenue growth does not necessarily translate into increased profitability. While a robust 65% of informal businesses reported an increase in revenue over the past year, a significantly lower 47% experienced a corresponding rise in their profit margins. This widening gap is directly attributable to the surge in the cost of doing business, a sentiment echoed by nearly eight in ten (79%) of the surveyed entrepreneurs who reported an increase in their operational expenses.
The primary drivers behind this cost escalation are multifactorial, with higher supplier prices, increased transportation expenses, and the depreciating value of the Nigerian Naira playing pivotal roles. The Nigerian currency has experienced a dramatic decline, losing approximately 70% of its value in 2024 alone, following the Central Bank of Nigeria’s relaxation of long-standing foreign exchange restrictions. This devaluation has had a profound impact on an import-dependent economy, contributing to soaring inflation that reached a 28-year high in November 2024, particularly driven by escalating transport costs.
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, articulated the severity of the Naira’s depreciation. He noted that "The value of the Naira against foreign currencies depreciated from 460 NGN/USD to around 1600 NGN/USD from June 2023 – June 2025." This sharp decline, Zauro explained, has directly fueled "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 impact of these rising costs is evident in the declining savings capacity of informal businesses. In the past year, only 74% of these enterprises managed to save money, a stark contrast to the 92.4% reported in the previous year. This reduction in savings capacity not only curtails their ability to weather economic shocks but also limits their potential for future investment and expansion.
Resilience Under Pressure: A Survival Check for Nigerian SMEs
The Moniepoint report also delves into the resilience of these businesses, posing critical questions about their financial buffers and their ability to withstand economic downturns. A significant concern highlighted is the limited savings buffer of many businesses. The report indicates that 42% of businesses can only survive for one month or less if their income were to cease, underscoring their vulnerability to unexpected disruptions.
The escalating cost of doing business is identified as a primary barrier. The report’s analysis emphasizes that "The cost of doing business has become the primary barrier preventing revenue gains from converting into tangible profit for nearly half the sector." This suggests a systemic issue where increased economic activity, while generating revenue, is being eroded by mounting expenses before it can translate into sustainable profits.
Saving and Borrowing Trends Amidst Economic Uncertainty
Despite the profitability challenges, informal businesses continue to prioritize saving, albeit with reduced capacity. Cooperatives and digital banks remain their preferred channels for safeguarding their earnings. The allocation of these savings is predominantly directed towards business expansion (41%) and the procurement of goods (24%), indicating a persistent drive for growth and operational continuity.
However, the economic climate has also fostered an increased borrowing appetite, driven by a confluence of factors including higher interest rates and more stringent lending conditions. Moniepoint observes 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." This highlights a critical reliance on internal savings as the main source of capital for growth and emergency needs, further emphasizing the importance of improving profitability to bolster these savings.
A Call for Policy Rethink: Moving Beyond Survival
The persistent challenges faced by Nigeria’s informal sector necessitate a fundamental shift in policy approaches. Experts are calling for a move away from fragmented interventions towards more coordinated and systemic measures designed to unlock genuine growth and foster greater financial inclusion.
Foyinsolami Akinjayeju, CEO of Enhancing Financial Inclusion & Advancement, asserts that "Government policies must shift from fragmented interventions to coordinated, systemic measures to unlock growth and inclusion for informal business." This sentiment is echoed by Chinyere Almona, Director-General of the Lagos Chamber of Commerce and Industry, who believes that "If informal businesses are to evolve into growth-oriented employers, policies must deliberately target their transition from survivalist enterprises to scalable ventures."
A crucial foundational step, according to Almona, involves 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." Such initiatives, if effectively implemented, could equip entrepreneurs with the necessary skills to navigate complex economic landscapes, optimize their operations, and transition from a survivalist mindset to one focused on sustainable growth and job creation.
The implications of these findings are profound. If Nigeria’s MSMEs, the bedrock of its economy, remain trapped in survival mode, the nation’s potential for broad-based economic development, poverty reduction, and widespread job creation will be significantly hampered. Addressing the rising cost of doing business, enhancing access to affordable finance, and fostering a supportive policy environment are critical imperatives for ensuring that these vital enterprises can not only survive but thrive, contributing their full potential to Nigeria’s economic prosperity. The Moniepoint report serves as a critical diagnostic tool, urging stakeholders to recognize the urgency of the situation and to implement targeted, impactful strategies that can catalyze a transition towards growth and resilience within Nigeria’s informal economy.
