Over 51.6 percent of Nigerians have become business owners to make ends meet and provide basic needs.
Moniepoint disclosed this in its Informal Economy Report 2024, launched in Abuja on Friday in partnership with the Small and Medium Enterprise Development Agency (SMEDAN) and the Ministry of Trade and Investment.
“About half (51.6 percent) of business owners we spoke to chose unemployment as the reason they started a business. 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 percent).
“While unemployment was the leading motivation for starting a business among men, we found that insufficient income from more formal employment was the higher motivation among women,” it said.
Moniepoint revealed that the informal economy contributed up to 90 percent of employment in Nigeria. According to the National Bureau of Statistics (NBS) most recent labour force survey, Nigeria’s unemployment rate rose to 5.0 percent in the third quarter of 2023 from 4.2 percent in the previous quarter. The statistics body highlighted that 87.3 percent of Nigerians are self-employed.
Moniepoint’s survey revealed that 43 percent of Nigeria’s working population aged 25 and 34 already own/run a business, creating job and wealth opportunities.
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It disclosed that 38.6 percent of the surveyed businesses ventured into retail and general groups, and 15.2 percent of food and drinks were the most rewarding trade in the informal sector.
It said, “Most businesses in the informal economy earn money for daily living expenses and feeding. They also mention things like school fees and transportation as additional expenses. Only three out of ten of these businesses choose to reinvest in their business as their primary expense.”
According to the International Finance Corporation (IFC), 65 million businesses, or 40 percent of formal micro, small and medium enterprises (MSMEs) in developing countries, have an unmet financing need of $5.2 trillion annually.
In the informal economy, where businesses often face bleak odds, access to credit remains crucial. The payment company stated that 70.1 percent of these businesses said they had accessed some form of credit. “When businesses in the informal economy do get access to loans, their primary sources are from friends and family (70.7 percent). Other sources are from loan platforms (15.1 percent) and traditional banks (12.2 percent),” the report added.
Nigeria is home to approximately 40 million MSMEs, of which almost 90 percent are in the informal economy. The informal economy, also known as the shadow economy, comprises businesses typically described as untaxed and unregistered.
Charles Odii, Director General/Chief Executive Officer of SMEDAN, said, “Nigeria’s approximately 40 million small businesses that reside in the informal sector are born of both necessity and entrepreneurial zeal. They exemplify the famous ‘hustling’ spirit that unites Nigerians across social divides and is responsible for the employment of millions. Ensuring their survival and catalyzing their growth is crucial for poverty elimination, rural industrialization, and the enhancement of livelihoods, all three core mandates of SMEDAN.”
