Nearly 90% of informal businesses in Nigeria make less than N500,000 monthly profit- report

Nearly 90 percent of informal businesses in Nigeria generate less than N500,000 in monthly profit, with only 1.3 percent reporting earnings above N2.5 million, according to Moniepoint’s 2024 Informal Economy report.

The report underscores the informal sector’s volatility and the difficulty in sustaining long-term growth, while noting that 80 percent of informal businesses have been operating for less than five years, concentrated in low-productivity sectors, offering severely limited opportunities for income mobility.

This reality is also echoed in the 2025 report by the Nigerian Economic Summit Group (NESG), titled, ‘From Hustle to Decent Work: Unlocking Jobs and Productivity for Economic Transformation in Nigeria’, which warns that Nigeria’s economy is running on a ‘survivalist’ mode, with a staggering 93 percent of the workforce engaged in informal employment.

Read also: Hustle economy: 93% of Nigerians in ‘survivalist’ informal employment

The overwhelming reliance on informal, often subsistence-level activities often born out of necessity rather than passion, such as petty trading, roadside services, and small-scale agriculture, is actively hindering national development and poverty reduction.

Financially, the informal sector remains constrained, with gender disparity evident among female-led enterprises, as 9 out of 10 earn below N250, 000 monthly, highlighting the persistent income gap and the economic hurdles faced by women in the sector.

Despite these challenges, entrepreneurial resilience is evident as half of the informal business owners surveyed run multiple ventures, with those in operation for over six years showing a greater tendency to diversify their income streams.

Also, women continue to play a vital role, accounting for 37.1 percent of informal business operators. Their presence, alongside a predominantly youthful workforce, over half of whom are under 34, signals a dynamic but under-supported segment of the economy.

Read also: Nigeria’s informal economy: Navigating between resilience and vulnerability

Why Nigerians venture into informal businesses

About 51.6 percent of entrepreneurs in informal businesses cite unemployment as their primary motivation, while women point to inadequate income from formal employment.

The report reveals that only 2.8 percent of respondents said they launched their ventures out of personal interest or ambition.

Regarding income generated from these businesses, they typically go towards essential household expenses such as feeding, school fees, and transportation. Despite their small scale, these enterprises collectively represent a significant portion of Nigeria’s economic activity. As Tobi Amira, product manager, Moniepoint, noted, “Individually, they may seem small, but together they form a substantial part of the economy. The nation cannot thrive without supporting them.”

Experts argue that although the informal sector sustains the economy through sheer resilience, it receives little serious policy attention. Operators are frequently harassed and marginalised, despite contributing over N60 trillion to the economy. The scale of informal work is directly linked to Nigeria’s chronically low labour productivity, which averaged just 1.5 percent growth between 1990 and 2018 and has since declined further. This productivity trap is compounded by persistent national crises, erratic power supply, inadequate infrastructure, and widespread insecurity.

Another root cause of this informal explosion lies in the formal private sector’s inability to generate sufficient jobs.

The implications of 93 percent informal employment are profound, particularly for revenue mobilisation, as informality undermines effective tax collection.

Unlocking Nigeria’s economic potential will therefore require bold structural reforms, strengthening the formal private sector, investing in education to close the skills gap, and creating a macroeconomic environment that incentivises business expansion and the creation of decent, high-productivity jobs at scale.