Informal Businesses: Only a Small Percentage Record Monthly Income Surpassing ₦2.5 million, According to Survey Findings
The Moniepoint Informal Economy Report 2024, unveiled in Abuja, sheds light on the challenges and opportunities for small and medium-sized enterprises (SMEs) and informal businesses in Nigeria. This comprehensive report, a collaborative effort between Moniepoint, the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), and the Federal Ministry of Industry, Trade and Investment (FMITI), provides valuable insights into the informal economy of Nigeria.
Key Findings:
- Unemployment and Low Wages Drive Entrepreneurship: A deficiency in business skills is prevalent, as the primary reason for starting a business for most people (51.6%) is unemployment. Nearly one-third (35.9%) are driven to entrepreneurship because their current jobs do not pay well.
- High Failure Rate in the Informal Sector: Eight out of ten informal businesses have been in operation for less than five years, suggesting a high failure rate in the sector.
- Data Gaps and Lack of Financial Information: Significant data gaps exist regarding the revenue, profitability, survival rate, tax payments, and levies of MSMEs in Nigeria.
- Sectoral Breakdown: Retail and general trade, along with food and drinks, make up over half (53.6%) of Nigeria's informal economy by transaction value.
- Income Distribution: Nearly half (48%) of the income earned by most business owners is spent on daily family expenses, while another 20.1% goes towards feeding expenses. A significant portion (29.7%) of the income is reinvested back into the businesses.
- Profitability: 79% of small businesses in Nigeria earn less than ₦250,000 monthly profits. Only 1.3% of small businesses in Nigeria make more than ₦2.5 million in monthly profits.
- Job Creation: MSMEs in Nigeria create 60 million jobs.
- Banking Services for the Informal Sector: Moniepoint has established banking services through extensive distribution to millions of Nigerians within the informal sector.
- Contribution to GDP: Nigeria's micro, small, and medium enterprises (MSMEs) contribute 50% to the country's GDP.
- Transactions Processed: Moniepoint, a fintech company, processed over 5 billion transactions in 2023.
- Young Demographic: The majority of informal sector workers are under 34 years old.
This report provides valuable insights for policymakers and economic development agencies, offering recommendations to support the growth and success of SMEs and informal businesses in Nigeria. The five-year milestone is crucial, as it is typically when owners establish second businesses. Longevity is thus a predictive measure of business expansion.
