Moniepoint’s 2025 Informal Economy Report reveals what most Nigerians already live, small businesses are earning more but gaining less.

Sixty-five percent of Nigeria’s informal businesses across the country reported an increase in revenue over the past year, but only 47% saw a growth in profit. At the same time, 79% said the cost of doing business had increased, driven mainly by higher supplier prices, transport expenses, and the relentless depreciation of the naira.

This contradiction, of higher earnings but shrinking returns, captures the state of the Nigerian economy today.

Growth Without Profits

The country’s informal economy looks alive. The markets are filled with activities, goods are moving daily, artisans are finding work, and service providers are busy, but look deeper, they are all exhausted. 

The report stresses how traders, among others, watch their margins evaporate, unable to keep pace with inflation. “The cost of doing business has increased for 80% of informal businesses in that same period. A goal for us in this report was to establish context like this: helping key stakeholders see and understand the effects of every decision made on informal businesses, and giving them a voice where they’ve previously gone largely unheard,” said Tosin Eniolorunda, founder and group CEO, Moniepoint Inc.

Unsurprisingly, 44% of Nigeria’s informal businesses make less than ₦20,000 daily in revenue, and most make profit of only ₦10,000 to ₦20,000 a day. Business owners skip meals to restock, workers forgo pay to keep their jobs.

And for women-owned businesses, 41% of women earn below ₦10,000 daily, compared to 34% of men. It tells us that Nigeria’s informal economy, while inclusive in appearance, still aligns with the inequalities of the formal one.

Survival Mode Economics

We see an economy built on individuals, isolated, unstructured and overstretched, highly fragmented. Eighty-five percent of informal businesses are sole proprietorships, usually run by one person who handles everything from supply to sales to bookkeeping. Only 40% employ labour, and when they do, it’s typically one to three workers. It’s not that they don’t want to expand, it’s just that they can’t afford to.

Record keeping is also informal. Seventy-five percent of business owners say they track their income and expenses, but 38% disclose they do so mentally, without written or digital records. Most lack a clear view of their cash flow, making them invisible to lenders and policymakers.

That lack of structure limits access to credit, planning, and long-term growth.

Credit access is also deteriorating as 51% of informal business owners have never taken a loan and have no intention to do so, compared to 30% in the last report.

Fear of debt, high interest rates, and lack of collateral keep them shut out of the financial system. Among those who borrow, only 6% have ever secured loans above ₦1 million, with digital lenders and microfinance banks emerging as their most common sources.

The result is a self-sustaining cycle of informality; low records, low credit, low growth.

Inflation and the Cost of Resilience

Inflation has become the most punishing cost of doing business in Nigeria. It’s the invisible tax that eats into every sale, every restock and every saving. 

Dr Nurudeen Abubakar Zauro, technical adviser to the President on Economic and Financial Inclusion, explained:

“With the removal of fuel subsidies and devaluation of the Naira by the monetary authorities, inflation rate increased from 22.41% in May 2023 to a climax of 34.8% by December 2024 according to the data from the National Bureau of Statistics (NBS). In July 2025, inflation rate declined drastically to 21.88%.”

For informal businesses, that drop brings a little comfort. Inflation may have eased statistically, but prices are still suffocating. The report found that while 74% of business owners save money, 69% save less than ₦50,000 monthly, and 42% say their savings cannot last a month if their business income stops.

Even the much-celebrated digital transition has not fully arrived. While many businesses use transfers to restock, most still prefer to receive payments in cash, and only 16% say digital transactions account for more than half of their total revenue. The infrastructure may be modern, but consumer behaviour is still very traditional and survival rarely leaves room for experimentation.

Policy and Structural Limitations

For an economy that contributes around 65% of the nation’s GDP and supports over 80% of jobs, the informal sector is strangely underserved by policy. It sustains Nigeria, but without protection. 

Dr Chinyere Almona, director-general of the Lagos Chamber of Commerce and Industry, noted:

“The most pressing challenge, therefore, is misaligned policy frameworks that inadequately balance revenue generation with sectoral resilience, inadvertently driving many players further into informality. What is needed is not merely regulation, but coherent regulatory empathy, a framework that recognises informality as a springboard for innovation, employment, and resilience, rather than a nuisance to be managed.”

Despite recent policy initiatives such as the Nigeria Consumer Credit Corporation (CrediCorp), the Nigeria Tax Administration Act (NTAA), and small business registration campaigns, the report disclosed that formalisation is still out of reach for most small business owners, expensive, bureaucratic and unrewarding. 

“Although many informal businesses are unfamiliar with the process of registering their business, the assumption is that it is costly and complex. These assumptions make them unlikely to attempt the process,” said Zauro.

It’s not a lack of will, but a lack of trust. 

From Resilience to Reform

If there’s one thread that ties Moniepoint’s findings together, it’s that resilience is not enough. The informal sector needs access, not a round of applause.

In her commentary, Dr. Almona called for a shift in thinking. “Policies must pivot from punitive compliance models to incentive-driven, inclusion-focused strategies to effectively support growth and formalisation.”

That means simplifying registration, improving access to finance, expanding digital infrastructure, and providing targeted support for women entrepreneurs; all areas where private sector players like Moniepoint, SMEDAN, and IFC are already collaborating and this must continue in order to bridge the trust gap between the street and the system. 

Moniepoint’s report measures Nigeria’s informal economy, exposing its weaknesses and the fatigue of millions of businesses. Nigerians are counting coins under candlelight, calculating what can wait till tomorrow. Informal businesses are the backbone of the economy, but they’re carrying too much weight without support.

Until policymakers, financiers, and regulators begin to design for their reality, not their assumptions, Nigeria’s growth will stay uneven. The country’s entrepreneurs are doing their part. It’s time the system met them halfway.

Some unique deals still happen. LemFi, for example, raised $53 million in Series B early in 2025, its biggest round so far. But they are exceptions. Most startups in Nigeria do not manage to clear this gap, and I believe this lack of late-stage funding is one of the biggest risks to our tech sector’s sustainability.

What We Mean by the “Series B Cliff”

Series B is not about “more money.” It is a change in expectations. A startup at Series A is proving its product works, acquiring customers and showing early traction. By Series B, investors expect evidence of scale: solid unit economics, growth across markets, usually profitability or a clear path to it.

In Nigeria, many startups do prove traction. But moving to that next level, expanding nationally or regionally, improving margins, handling regulatory and foreign exchange risks, is much harder. The cliff appears when the risk of scale is too great, when external factors stack up, and when investors become sceptical.

Structural Challenges Holding Us Back

There are multiple structural problems. Some are external. Some within our control. Together, they make the Series B stage difficult to cross.

• Risk Aversion & Global Investor Doubt
  Many foreign investors now demand stronger proof of stability before committing late-stage capital. Macroeconomic instability (inflation, currency fluctuations) makes projections unreliable. Investors see higher risk in Nigerian startups compared to similar ones elsewhere in Africa or globally, and they price that risk either by demanding more control or by withdrawing entirely.
• Weak Exit Opportunities
  For Series B to make sense, there must be credible exit routes such as acquisitions, IPOs, or secondary markets. In Nigeria, large exits are still rare. When exits don’t happen, investors find it hard to justify taking big risks with late-stage funding.
• Corporate Governance and Transparency
  Many startups at seed or Series A have minimal structures: sometimes weak financial reporting, limited board oversight, and loose cost controls. Late-stage investors demand maturity: audited accounts, clear governance, accountability. When those aren’t in place, deals stall or valuations suffer.
• Capital Scarcity for Growth Rounds
  While seed and A-round funding have grown thanks to angel investors, incubators, and early-stage funds, there are comparatively few growth funds in Nigeria willing to lead or participate in large B rounds. Local LPs (pension funds, mutual funds) are careful; regulatory friction around foreign capital complicates large inflows.
• Macro Instability & Currency Risk
  The naira’s instability, difficulty obtaining foreign exchange, and inflation make cost structures unpredictable. For businesses that depend on imported inputs, software subscriptions in foreign currency, or paying overseas partners, this risk can incapacitate margins when scaling.
• Market and Infrastructure Barriers
  Scaling requires infrastructure: reliable power, logistics, and internet latency. In many parts of Nigeria, local infrastructure is weak. Operational costs rise, and unpredictable outages happen. These extra burdens make scaling beyond Lagos expensive and risky.

The Cost of Hitting the Cliff

When startups cannot secure Series B or late-stage backing:

• Growth slows. They may lay off staff, reduce marketing spend, or halt plans to expand into new regions or countries.
• Innovation is stunted. Features, talent hires, R&D often are deferred or dropped.
• Talent may leave. When funding is uncertain, senior hires often prefer safer roles or move abroad.
• Ecosystem morale suffers. When founders and VCs see many good companies stagnate, fewer entrepreneurs attempt ambitious scale-ups.

Examples:

• LemFi’s success is the positive side. 
• Arnergy, in the renewables sector, raised $18 million Series B in 2025, but employees pointed out how difficult it was to get liquidity until after that round. The gap in cash between rounds creates real hardship.

How We Can Fix This: Mitigation & Path Forward

I believe there are concrete, actionable ways the ecosystem can reduce the gap. Some require policy changes. Others are internal to startups or investors. All must happen together.

• Grow Local Growth Funds
  We need more funds based in Nigeria (or managed by Africans) that understand the risk profile here. These growth-stage funds must have patience, take larger checks, and bear risk that foreign investors avoid.
• Policy Stability & Regulatory Certainty
  Clear rules for foreign investment, stable regulation, easier repatriation of profits, sensible taxation on startups. When policies flip frequently, investors pull back. Government must show it understands growth-stage needs.
• Strengthen Corporate Governance
  Startups must prepare earlier: audited financial reports, boards that include independent members, clearer financial controls. That builds trust for late-stage backers.
• Encourage Exit Market Development
  Stock exchanges need to streamline IPOs for tech companies. Secondary markets for private shares would allow founders and early investors liquidity without waiting for acquisition or IPO.
• Leverage Alternative Financing Structures
  Hybrid structures (debt + equity), revenue-based financing, and convertible notes could help bridge rounds. These structures distribute risk differently and may attract investors unwilling to lead a pure equity round.
• Manage Cost & Efficiency Early
  Founders should build for profitability early: unit economics must be straightforward, margins tracked, and customer retention high. Scaling quickly without sustainable cost base is dangerous.
• Matchmake Corporate Partnerships
  Strategic corporate investors (local or multinational) can provide revenue contracts, distribution channels, and infrastructure support. Working relationships with corporates reduce risk and may be stepping stones to larger funding.

Looking Beyond the Cliff

The Series B cliff is not inevitable for startups. I don’t believe we’re stuck. We have proof of concept in LemFi, Arnergy and a few others that some Nigerian startups can break through. But to shift from a handful of wins to widespread scale, we need maturation in investment behaviour, stronger governance, more stable macro conditions, and growth-stage financing infrastructure.

If I were advising policymakers, I’d push for reforms now. If I were advising founders, I’d urge planning for the scale hurdle from day one. Crossing the cliff will demand discipline, transparency, and patience. But once we do, Nigeria’s startup ecosystem will compete globally.