Nigeria’s informal economy: The fragile foundation of a $1 trillion ambition
In the bustling markets of Alaba, the roadside workshops of Nnewi, and countless micro-stalls across Nigeria’s 36 states, a vast economic engine hums beneath the radar of official statistics. This is the informal economy—resilient, dynamic, and accounting for an estimated 42.5 percent of GDP and over 80 percent of all employment. Yet for all its scale and indispensability, this sector operates on margins so thin that a single shock—a health crisis, a currency collapse, a policy misstep—can plunge millions into destitution. As Nigeria pursues its audacious $1 trillion economy target by 2030 under the Renewed Hope Agenda, a sobering truth emerges: the foundation upon which this ambition rests is dangerously brittle. The recent launch of Moniepoint’s 2025 Nigerian Informal Economy Report, alongside its AI-powered chatbot “M”, offers an unprecedented lens into this often-misunderstood sector. More than a corporate milestone marking the fintech’s decade of operation, this is a watershed moment for Nigerian economic policy. For the first time, rigorous data analytics and artificial intelligence are being deployed to illuminate the true potential—and perilous vulnerabilities—of the economy’s backbone.
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Resilience without security
The report paints a portrait of extraordinary entrepreneurial grit shadowed by systemic fragility. While 65% of informal businesses reported revenue growth over the past year, a cruel paradox emerges: only 47% saw profits rise. The culprit is Nigeria’s relentless cost spiral. A staggering 79% of businesses experienced increases in operating costs, driven by supplier price hikes, soaring transportation expenses, and the naira’s persistent depreciation—which plummeted 95.6% in 2023 alone following the currency float. The profit margins reveal an economy walking a tightrope. Some 44% of informal businesses generate less than ₦20,000 in daily revenue, with 38% earning under ₦10,000 in daily profit—approximately $7 at current exchange rates. Most critically, 42% lack sufficient savings to survive a month without income. This statistic should alarm every policymaker: Nigeria’s economic engine operates one crisis away from mass failure. Yet these are not mere survival mechanisms. Four in ten informal enterprises employ staff beyond the owner, making them crucial job creators in a nation where formal wage employment accounts for just 11.8% of the workforce. The sector remains predominantly youth-driven, with 73% of owners aged 18-44, though women’s participation has declined slightly to 35%.
The capital starvation crisis
The informal economy’s structural barriers to scale are profound. Fully 85% of ventures are sole proprietorships, fragmented and undercapitalised. More damning is the credit aversion crisis documented in the report: 51% of business owners have never taken a loan and do not intend to—a dramatic increase from 30% previously. Fear of repayment failure in a high-inflation, high-interest environment is the primary deterrent. When credit is accessed, it is typically meagre: only 6% have secured loans above ₦1 million. This capital starvation is partly self-inflicted. While 75% of owners claim to track finances, 38% do so mentally, without written or digital records. This lack of financial visibility renders them invisible to institutional lenders and government support programmes alike. For a sector that contributes 42.5% of a rebased GDP of ₦372.8 trillion ($243.3 billion), this documentation gap is a national tragedy. The implications for the $1 trillion goal are stark. Achieving that target requires sustained GDP growth exceeding 7% annually. If the sector powering nearly half the economy cannot access affordable capital, scale operations, or demonstrate creditworthiness, the growth trajectory is a fantasy.
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“If the sector powering nearly half the economy cannot access affordable capital, scale operations, or demonstrate creditworthiness, the growth trajectory is a fantasy.”
Digital finance as the gateway to formalisation
The path forward lies in twin imperatives: digitisation and formalisation. While cash remains dominant—50% of transactions by customer preference—a quiet revolution is underway. Business owners increasingly favour bank transfers for supplier payments (48%), drawn by speed, security, and automatic record-keeping. Card payments reportedly account for 80.2% of payment resolutions, dwarfing online transfers at 19.8%. This digital shift is not spontaneous but infrastructure-enabled. Moniepoint’s decade-long journey, processing 26 million payments daily with a 99.9% POS success rate, exemplifies the critical role fintechs play in bridging the formal-informal divide. By disbursing ₦12 billion in single-digit interest loans and facilitating business registrations through partnerships with the Corporate Affairs Commission, such platforms are not merely financial intermediaries—they are nation-building instruments. The launch of “M”, Nigeria’s first informal economy AI chatbot using Large Language Model technology, marks a strategic leap. For too long, economic data has languished in inaccessible reports. “M” democratises knowledge, allowing policymakers, journalists, and entrepreneurs to query the informal economy in plain language: How many women-owned businesses operate in Aba? What challenges do Kano retailers face? This conversational access transforms abstract statistics into actionable intelligence.
A policy compact for transformation
Vice President Kashim Shettima rightly termed the informal economy “the heartbeat of Nigeria’s transformation”. But if that heartbeat is erratic—vulnerable to cost shocks, starved of capital, operating in regulatory limbo—the entire economic body suffers. The Moniepoint report provides an evidence base for a new policy compact. First, address the financing gap through tailored microcredit and buffer-savings products that acknowledge the sector’s cash-flow realities. Second, accelerate digital and financial literacy, enabling business owners to harness the record-keeping and market-access benefits of digital tools. Third, incentivise formalisation not through punitive regulation but through tangible benefits: structured credit access, eligibility for government contracts, and social security coverage. The government’s ambition to expand the digital economy to 21% of GDP by 2027 is laudable, but it must be anchored in the granular realities this report documents. Data from digital transactions is the oxygen that will power the transition from informal resilience to formal scale.
From Anecdote to Evidence
As Moniepoint marks its 10th anniversary, the 2025 Informal Economy Report serves as more than a corporate achievement. It is a mirror held up to a nation’s economic soul. Nigeria’s quest for a $1 trillion economy is not a monolithic project executed from Abuja. It is the aggregation of millions of micro-ambitions: the trader in Onitsha, the mechanic in Mushin, and the hairdresser in Kaduna. Their dreams are the fuel; their fragility is the warning. Moving forward requires a fundamental shift from celebrating resilience to engineering sustainability. The data is now available. The tools—from AI-powered insights to digital payment rails—are operational. What remains is the political will to transform a fragile engine into a stable foundation. For if Nigeria cannot support the sector that employs 80 percent of its workforce and produces 42.5 percent of its output, the $1 trillion dream will remain precisely that: a dream deferred. The informal economy is not a problem to be solved but an asset to be unlocked. With the right mix of capital access, digital infrastructure, and policy empathy, this sector can shift from survival mode to growth engine. The choice facing Nigeria’s policymakers is clear: invest in the foundation, or watch the edifice crumble.
Dr Oluyemi Adeosun, Chief Economist, BusinessDay Media
