A new report by financial technology firm (fintech), Moniepoint, has revealed that only 1.3 per cent of informal businesses earn over N2.5 million monthly.
The firm, in its maiden publication, titled, ‘The Informal Economy Report 2024’, said it spoke to hundreds of business owners and analysed the data from over 2 million businesses across Nigeria to understand Nigeria’s informal economy.
According to the report, businesses in the informal market contribute over half of Nigeria’s gross domestic product (GDP), which is reflected in their revenues, with 72.3 per cent of them achieving monthly revenues exceeding N1,000,000.
“But their actual profit deviates from these high figures. Individually, most of them make less than ₦250,000 monthly. On the higher end of the spectrum, only about 1.3% of businesses in Nigeria’s informal economy earn above ₦2.5m monthly,” the report said.
It further said men are more than twice as likely to earn higher incomes in the informal economy compared to women — although the overall earning potential remains low.
The report further showed that nine out of 10 women-owned businesses in the informal economy earn less than N250,000 per month.
It said approximately 51.6 per cent of the business owners who spoke to Moniepoint cited unemployment as the reason for starting their businesses.
“The closest primary reason to that were those who stated that they started a business because their current job wasn’t providing enough income (35.9%),” it added.
Analysis by zones showed that the south-west has the largest volume of businesses in the informal economy, including Nigeria’s commercial capital, Lagos.
According to the report, in the informal economy, where businesses often face challenging conditions, access to credit is crucial.
Moniepoint said 70.1 per cent of these businesses have obtained some form of credit for their operations.
“For many of these business owners, loans help with restocking, expansion, and keeping the business afloat in unfavourable times,” the firm said.
“Credit for these businesses includes BNPL offerings to their customers, providing goods and services for repayment at a later date.
“Business owners cited low trust from previous bad experiences for not extending this service to their customers.”
The report said the primary sources of loans for business owners are friends and family (70.7 per cent), loan platforms (15.1 per cent), and traditional banks (12.2 per cent).
