Nigeria is a nation of hustlers and business owners. Its army of micro, small, and medium enterprises (MSMEs) plays a crucial role. A roll call of stats: MSMEs contribute 50% to GDP, create 60 million jobs, and are the addressable market for many startups that have raised money in the past decade.
Yet for such a crucial segment, there are significant data gaps. How much revenue do these MSMEs make? How much of that translates into profits? What is the likelihood that these businesses will survive past the five-year mark? How much do they pay in taxes and levies?
Here are two interesting answers: Only 1.3% of small businesses earn more than ₦2.5m monthly in profits while 79% earn less than ₦250,000 monthly profits.
Moniepoint informal economy report 2024
Those data points are from Moniepoint’s 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.
“By quantifying the informal economy’s impacts and nuances, we can better shape policies and programs to empower and uplift the entrepreneurs driving it forward,” said Tosin Eniolorunda, Moniepoint’s CEO.
With more than 5 billion transactions processed in 2023, Moniepoint is perfectly placed to collect data and map the trends in Nigeria’s informal economy, having built its banking businesses through strong distribution to millions of Nigerians in the informal sector.
The fintech spoke to over 2 million businesses that signed up on its platform between 2019 and 2024 and excluded data from the thousands of agents scattered over the country.
Follow the money
“By transaction value in Naira, retail & general trade alongside Food & Drinks, accounted for over half of Nigeria’s informal economy at 53.6%,” the report said.
Most business owners spend almost half their income on daily family expenses (48%). Feeding takes another 20.1%, while reinvesting in the businesses is 29.7%.
The businesses in this category are neighborhood shops, restaurants, supermarkets, and others that sell “daily necessities,” explaining the influx of funding into B2B startups that are solving the distribution challenges these businesses face.
Nigeria’s informal economy: Young businesses led by young people
Over half (58%) of informal sector workers are under 34 years of age, and the businesses they work for are equally young. Eight of ten informal businesses are less than five years old, suggesting a high failure rate. It shows a gap in tools and support that keep businesses alive.
It also suggests a gap in business skills because unemployment is the top reason for most people to start a business (51.6%) while others start a business because their jobs don’t pay well (35.9%).
The five-year mark is also important because it is typically at this point owners set up second businesses. Longevity is a predictive measure for business expansion, the report showed.
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Copyright for syndicated content belongs to the linked Source : TechCabal – https://techcabal.com/2024/07/05/nigerias-informal-economy-earn-above-%E2%82%A62-5m-monthly/
