Formalising Nigeria’s Informal Economy

Tade Wasiu, a fashion designer known for his exquisite dashikis and kaftans, embodies the spirit of Nigeria's informal economy. Operating from Ilogbo, a Lagos ghetto, before moving to Surulere, Wasiu found purpose and productivity in his craft, steering clear of street life. However, his journey is fraught with the typical challenges faced by small businesses in Nigeria.

"Funding is a major issue in the business. It prevents us from buying the necessary tools to expand. Power is also a challenge. We pay so much for electricity," Wasiu stated, highlighting the critical need for government support, which he has yet to receive despite four years in business. His story is a microcosm of the larger informal sector, which, despite its resilience, grapples with weak profitability and limited financial buffers.

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The tailoring job kept me away from the streets and helped me to engage in something productive.

A 2025 Moniepoint Informal Economy Report reveals that 38% of informal businesses earn less than N10,000 daily in profit, and 44% generate less than N20,000 in daily revenue. Furthermore, 42% of these businesses have savings that would last less than a month if income ceased, and 69% save less than N50,000 monthly. This underscores the precarious financial situation for most operators.

Despite these vulnerabilities, the informal sector remains a vital engine for employment in Nigeria, a nation with a population exceeding 200 million, over 60% of whom are under 30. The 'grey economy' offers opportunities and sustains millions of livelihoods, especially as unemployment rises in the formal sector. The report also noted that 74% of operators save regularly, primarily for business expansion, inventory, and emergencies, often utilizing cooperative societies and digital banking services.

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Funding is a major issue in the business. It prevents us from buying the necessary tools to expand. Power is also a challenge. We pay so much for electricity.