Cash is king. For decades, that truism has held in Nigeria, a country with a famously huge informal economy. Yet, recent trends show that customer behaviour is changing and digital payments and transfers are now just as popular as cash, according to Moniepoint’s Informal Economy Report (2024).

Low trust historically drove the insistence on cash payments and NIBSS instant payment (NIP) also tapped into this trust problem. While instant payments became popular, many players in Nigeria’s informal economy resisted them for years because of a distrust for Nigerian banks which had their fair share of troubles in the 90s. 

There was also the fact that bank transfers sometimes took hours to confirm and could cause long wait times for the customer. However, faster transfer times are changing that. A naira redesign that led to a cash crunch in February 2023 also propelled digital payments. 

Per Moniepoint’s Informal Economy report, customers of informal businesses prefer to pay with cards (24%), while transfers are also popular (18%). Cash, which has historically been king, is the third preferred payment method (15.2%) for customers. 

For business owners, cash (53.1%) is just as popular as cards (23.1%) and cards (23.1%). 

However, customer preferences continue to lead the way with most businesses (80.2%) in Moniepoint’s report taking card payments for in-person transactions, while 19.8% accept bank transfers.

Access to formal credit remains a challenge in Nigeria’s informal economy. Small businesses that deal with cash and often lack collateral and credit history to access interest-based loans from banks. With high lending rates and inflationary pressures, these businesses are forced to seek alternative funding options.

Around 70% of businesses said they have received some credit to support their business, a large portion of which came from family and friends (70.7%). Only 15.1% borrowed from loan apps and 12.2% from traditional banks.