In a recent report, Moniepoint disclosed that the majority of small businesses in Nigeria need loans to run their operations properly. In its first-ever publication titled The Informal Economy Report 2024, the fintech company explored the financial implications of the country’s small business enterprises.

Access to credit is crucial for businesses in the informal economy, which often confront challenging conditions. Moniepoint revealed that 70.1 per cent of these businesses have secured credit to support their operations.

“For many of these business owners, loans help with restocking, expansion, and keeping the business afloat in unfavourable times. Credit for these businesses includes BNPL offerings to their customers, providing goods and services for repayment at a later date.

The report indicated that business owners primarily obtain loans from friends and family (70.7 per cent), loan platforms (15.1 per cent), and traditional banks (12.2 per cent).

Other insights from The Informal Economy Report 2024 by Moniepoint

Informal businesses refer to economic activities such as home-based enterprises, street vending, and car washing that operate without formal business licenses or government registration.

Moniepoint conducted interviews with hundreds of business owners and analysed data from more than 2 million businesses throughout Nigeria to gain insights into the country’s informal sector before publishing the results in The Informal Economy Report 2024′,

According to the report, businesses operating in Nigeria’s informal market contribute more than fifty per cent of the country’s Gross Domestic Product (GDP). Their contribution is evident in their earnings, with 72.3 per cent of these businesses generating monthly revenues surpassing N1,000,000. However, only 1.3 per cent of informal businesses generate more than N2.5 million monthly.

“But their actual profit deviates from these high figures,” the report said. “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.”

According to the report, men in the informal economy are more than twice as likely as women to earn higher incomes, despite generally low earning potential overall. The report highlighted that nine out of every ten businesses owned by women in the informal sector earn less than N250,000 per month.

Additionally, approximately 51.6 per cent of business owners interviewed by Moniepoint cited unemployment as their primary motivation 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 regions indicated that the southwest region, which includes Nigeria’s commercial capital, Lagos, hosts the largest number of businesses in the informal economy.