Grace Ashiru
Nigeria is a nation driven by hustlers and business owners, with its army of micro, small, and medium enterprises (MSMEs) playing a pivotal role. These MSMEs contribute 50% to the GDP, create 60 million jobs, and serve as the addressable market for numerous startups that have secured funding in the past decade.
Despite their importance, significant data gaps exist for this crucial segment. Questions remain unanswered about the revenue generated by these MSMEs, the proportion that translates into profits, their likelihood of surviving beyond five years, and the amount they pay in taxes and levies.
Two notable statistics highlight the earnings landscape: Only 1.3% of small businesses make more than ₦2.5 million in monthly profits, while 79% earn less than ₦250,000 monthly profits.
These data points are drawn from Moniepoint’s Informal Economy Report 2024, unveiled in Abuja on Friday in collaboration with the Small and Medium Enterprise Development Agency (SMEDAN) and the Ministry of Trade and Investment.
“By quantifying the informal economy’s impacts and nuances, we can better shape policies and programs to empower and uplift the entrepreneurs driving it forward,” stated Tosin Eniolorunda, Moniepoint’s CEO.
Having processed over 5 billion transactions in 2023, Moniepoint is ideally positioned to gather data and analyze trends in Nigeria’s informal economy. The company has established its banking services through extensive distribution to millions of Nigerians within the informal sector.
The fintech company consulted over 2 million businesses that registered on its platform between 2019 and 2024, excluding data from the numerous agents distributed across the country.
According to the report, retail and general trade, along with food and drinks, make up over half of Nigeria’s informal economy by transaction value, accounting for 53.6%.
Nearly half of the income earned by most business owners is spent on daily family expenses (48%), with feeding expenses taking up another 20.1%. Meanwhile, 29.7% of the income is reinvested back into the businesses.
This category of businesses includes neighborhood shops, restaurants, supermarkets, and others that sell “daily necessities.” This explains the significant investment into B2B startups that address the distribution challenges faced by these businesses.
Over half (58%) of informal sector workers are under 34 years old, and the businesses they are employed by are equally young. Notably, eight out of ten informal businesses have been in operation for less than five years, suggesting a high failure rate. This highlights a significant gap in the availability of tools and support necessary to sustain these businesses.
Moreover, there appears to be a deficiency in business skills, as the primary reason for starting a business for most people (51.6%) is unemployment, while others (35.9%) are driven to entrepreneurship because their current jobs do not pay well.
The five-year milestone is crucial, as it is typically when owners establish second businesses. Longevity is thus a predictive measure of business expansion, according to the report.
