- A report by Moniepoint has shown that more men than women own businesses in the informal economy
- With data from over two million MSMEs, the report also shows that the bulk of business owners in the sector are young people aged 34 and below
- Among other details, the report noted that unemployment is the major reason for starting businesses in Nigeria’s informal economy
A report by Moniepoint, a fintech company providing banking services and loans through an online banking app, has revealed that more men than women operate businesses in the informal sector.
The report, titled, ‘The Informal Economy Report 2024,’ was launched in Abuja on Friday, July 5, in partnership with the Small and Medium Enterprise Development Agency (SMEDAN) and the Federal Ministry of Trade and Investment.
It identified that approximately 40 million Micro, Small and Medium Enterprises (MSMEs) are domiciled in Nigeria with 89.4 per cent of them in the informal economy.
In defining the general sector description, the report noted, “Unlike their formal counterparts, the informal economy comprises businesses typically described as untaxed and unregistered. This section of the economy has also been described using terms that include ‘underground,’ cash-in-hand, and the ‘shadow economy,’ signifying how hidden they are from formal systems and, often, regulatory bodies.”
With data from over two million businesses, the report found that women own 37.1 per cent of businesses in Nigeria’s informal sector against 62.9 per cent owned by men.
This data negates an earlier report by the United Nations (UN) Women, which noted that 89 per cent or nine out of 10 working women in Sub-Saharan Africa work in the informal economy.
The UN report also noted that in Asia, the figure is 95 per cent of total employment, while it is 59 per cent in Latin America and The Caribbean.
“These data points show that the informal economy represents a crucial avenue for women’s economic empowerment in Nigeria and across Africa despite challenges in equity,” the Moniepoint report noted.
More young people in Nigeria’s informal economy
The report also noted that young people make up the bulk of the workforce in the informal economy. It found that almost 58 per cent of the workforce in the sector is below 34 years old, as the largest group, representing 43.1 per cent, is between 25 and 34 years while 14.4 per cent are aged 18 and 24.
It added that the second largest group, representing 28.9 per cent of the sector, is aged 35 and 44, while the remaining percentage of the workforce, a cumulative 13. 6 per cent, are aged 45 and above.
“This youthful energy offers a tremendous opportunity for socioeconomic transformation through innovation, entrepreneurship, job and wealth creation,” the report noted.
Lagos remains Nigeria’s commercial nerve centre
According to the report, the South West geopolitical zone had the highest volume of businesses in the informal economy at 30.8 per cent, with almost half of it, representing 15.1 per cent, located in Lagos. The remaining five states are home to 15.6 per cent of businesses in the zone. This is followed by the South South with 19.9 per cent of businesses, while the North Central placed third with 16.8 per cent of businesses.
The South East, North West and North East came fourth, fifth and sixth, respectively, housing 13.2 per cent, 12.8 per cent and 6.6 per cent of businesses.
Over half of businesses in informal economy are retail/general trade, food/drinks
The leading category in Nigeria’s informal economy is the retail and general goods category, comprising 24 per cent of businesses. The food and drinks category follows with 13.4 per cent.
The report noted, “By transaction value in Naira, retail and general trade, alongside food and drinks, accounted for over half of Nigeria’s informal economy at 53.6 per cent. Businesses you’d typically find in this category include neighbourhood shops, restaurants, supermarkets and others that sell “daily necessities.”
Other categories of businesses in the sector include fashion (8.1 per cent), beauty and personal (6.9 per cent), agriculture (6.2 per cent), IT/electronics (6.1 per cent), construction (4.3 per cent), education (4.1 per cent), professional services (4.0 per cent), casual use (3.0 per cent), art and creatives (2.9 per cent), health care (2.8 per cent), oil and gas (2.7 per cent) and others (11.0 per cent).
Most businesses have been existing for 5 years, below
The report also found that most business owners in Nigeria’s informal economy have been operating for five years and below. The highest, representing 42.7 per cent, have been in business for between two and five years.
Those in operation for one to six months account for 21.7 per cent while those in existence for seven months to one year represent 17.3 per cent. Business owners that have operated for six to 10 years account for 13 per cent while those that have operated for 11 years and above represent 5.3 per cent.
The report noted that the data indicates the challenge of sustainability of businesses in Nigeria.
“Less than 20 per cent of businesses were over five years old, indicating the challenge of keeping businesses running for over five years. Programmes designed to enhance business resilience, like improved access to financing and support and development programmes, could be valuable,” it stated.
The report also found that half of the businesses owners in the informal economy own multiple businesses and those who had been in business for over six years were more likely to own multiple businesses.
It also found that men (52.2 per cent) often own multiple businesses in the informal economy than women at 45.9 per cent. This, it said, explains the apparent dominance of men in the sector by number of businesses.
Unemployment major reason for starting business
With the increasing rate of unemployment in Nigeria, which rose to five per cent in the third quarter (Q3) of 2023 from 4.2 per cent in Q2, 2023, it is not surprising that many business owners in the informal sector started their businesses because of unemployment.
Despite a revised assessment methodology by the National Bureau of Statistics (NBS) in 2023, which saw the unemployment rate drop from 33 per cent in Q4, 2020 “in line with international best practices,” the report showed that more than half of business owners in the informal economy, representing 51.6 per cent, went into business because of unemployment.
While only 2.8 per cent started their businesses out of passion, the report added that 35.9 per cent started businesses because their jobs weren’t enough income, while 3.8 per cent of businesses were passed down to their current owners.
It was also found that 53 per cent of those who started businesses because of unemployment were men, compared to 49 per cent of women. On the other hand, women, representing 40 per cent, started their businesses because their jobs weren’t providing enough income, compared to 34 per cent of men who started businesses for the same reason.
Should women be breadwinners of the family? Nigerians share their opinion
Meanwhile, TheRadar had reported the opinion of Nigerians on whether or not a woman should be the breadwinner of a family given the natural order of things.
Many had no issues with a woman being the breadwinner of the family while some felt it was not conventional and would not entertain such a development.
