A thought-leadership article on Nigeria’s MSME ecosystem, informality, fintech and the transition from survival to sustainable growth

Introduction

Nigeria’s economic story cannot be told without acknowledging the enormous contribution of micro, small and medium-sized enterprises (MSMEs). From the roadside food vendor to the neighbourhood provision store, fashion designer, mechanic, farmer, hairdresser, POS operator, small-scale manufacturer and online trader, millions of Nigerians depend on small businesses not merely as commercial ventures but as instruments of survival.

Yet, beneath the visible activities of these businesses lies a deeper economic reality: Nigeria has millions of entrepreneurs, but a significant proportion of them are operating businesses designed primarily to survive rather than businesses designed to grow.

This distinction is important because survival and growth are not necessarily the same thing. A business may generate enough money to feed a family, pay school fees, pay rent and restock its goods without necessarily possessing the structure, capital, records, technology, strategy or institutional capacity required to become a sustainable enterprise.

How, then, do we move millions of Nigerians from merely surviving through business to building businesses capable of creating wealth, employment and sustainable economic value?

The Invisible Giant of the Nigerian Economy

The Nigerian informal economy is enormous, but its very informality makes it difficult to capture completely through conventional economic statistics. A 2024 Informal Economy Report produced by Moniepoint in collaboration with SMEDAN and the Federal Ministry of Industry, Trade and Investment estimated that Nigeria has approximately 40 million MSMEs, with almost 90% operating in the informal economy.

The World Bank/IFC has similarly highlighted the scale of informality and the financing challenges associated with it. Its analysis estimated nearly 39.7 million MSMEs and identified a substantial unmet demand for MSME finance.

This creates an important paradox: the businesses may be economically significant while remaining institutionally less visible. A roadside retailer, mechanic, food seller, fashion designer or POS operator may appear insignificant individually, but collectively these enterprises constitute a substantial economic ecosystem.

Small businesses may be small individually, but they are not small collectively.

From Survival Strategy to Economic Opportunity

The 2024 Informal Economy Report found that 51.6% of surveyed informal business owners said they started their businesses because they were unemployed, while 68.2% identified feeding and family expenses as the primary things their business income supports.

This reveals something fundamental about Nigerian entrepreneurship. For many Nigerians, entrepreneurship was not necessarily the first choice; it was the available choice. A person loses a job and begins selling provisions. Someone cannot secure formal employment and begins operating a POS terminal. Another person starts selling clothes from home. A graduate begins selling food online.

These activities are entrepreneurial in nature, but their original motivation is often economic survival rather than business expansion. There is nothing inherently wrong with this. Such businesses provide an important social safety net.

The problem emerges when the business remains trapped at the survival stage even after it begins generating enough economic activity to justify expansion. The owner continues to operate exactly as they did when they started: without accounting systems, separation of personal and business money, inventory management, customer databases, formal planning or reinvestment targets.

The Survival Trap

This can be described as the survival trap. The business generates enough money to solve immediate household problems, but insufficient structure is created to transform the business itself.

Imagine a trader who makes ₦50,000 in profit in a month. If the entire amount is consumed by food, rent, school fees and transportation, the business starts the next month from almost the same position. The individual is working, the business is making money, but the enterprise is not necessarily growing.

This creates a cycle in which income is mistaken for growth. Growth, however, requires reinvestment, systems, knowledge, access to finance, technology, market expansion and a shift in how the entrepreneur sees the business—as an asset rather than simply as a daily source of cash.

Fintech and the Beginning of a New Era

One of the most interesting developments in Nigeria’s small-business ecosystem has been the emergence of financial technology. Companies such as OPay and Moniepoint have increasingly built products around merchants and small businesses.

Financial technology is doing more than making payments easier. It is beginning to create a digital footprint for businesses that historically operated almost entirely in cash. Digital payments, business accounts and transaction histories can potentially help establish cash-flow patterns, customer activity and evidence of business activity.

This matters because one of the major obstacles facing informal businesses is the absence of reliable business information. The World Bank/IFC has identified inadequate records and informality as barriers to formal financial access.

Digitalisation could therefore become one of the bridges between Nigeria’s informal economy and its formal financial system.

But Fintech Alone Cannot Transform the Informal Economy

Providing a POS terminal to a trader does not automatically transform the trader into a growing enterprise. Providing a digital bank account does not automatically create financial discipline. Giving a business access to credit does not automatically make the business productive.

Technology provides tools. The entrepreneur must know how to use those tools to build capacity.

The next phase of Nigeria’s MSME development must therefore concentrate on how businesses can become stronger, more productive and scalable enterprises.

The Missing Middle: Business Development Capacity

Many small-business owners know how to sell. They may know their customers and products and may be exceptionally hardworking. But running a sustainable business requires more than selling.

Financial management means understanding revenue, gross profit, operating expenses, cash flow and working capital. Record keeping means knowing exactly what comes into the business and what goes out. Inventory management means understanding which products move quickly and which products tie down capital. Marketing means moving from dependence on physical location to deliberate customer acquisition. Digital transformation means using social media, e-commerce, digital payments and business-management tools.

Human-resource management, business registration, compliance and strategic planning are equally important. The entrepreneur must move from asking, ‘How much did I make today?’ to asking, ‘Where should this business be in three years?’

The World Bank has previously identified inadequate access to business-development services—including technology, market information, product development, human-resource management, quality management, production systems and financial management—as constraints on Nigerian MSME productivity.

This is therefore not merely a problem of money. It is also a problem of capacity.

Access to Finance Remains Critical

Finance remains central. A business cannot expand if it cannot obtain the capital required to purchase equipment, increase inventory, employ workers, improve its premises or enter new markets.

In December 2025, the World Bank approved a $500 million Fostering Inclusive Finance for MSMEs in Nigeria (FINCLUDE) project aimed at expanding access to finance for small businesses. The programme is designed to mobilise private capital and expand debt financing to MSMEs while encouraging longer-term financing for productive investment.

The future of MSME finance should therefore not simply be about giving businesses short-term money to survive until the next month. The bigger objective should be productive finance: capital that allows businesses to acquire equipment, increase capacity, improve productivity and enter larger markets.

The Cost of Doing Business

Finance is only one side of the problem. Nigerian businesses also operate within an environment characterised by infrastructure and operating-cost pressures. Electricity, transportation, logistics, taxation, insecurity, inflation, regulatory requirements and market access can influence the ability of small enterprises to survive and expand.

The 2025 Informal Economy Report reported that 79% of surveyed informal businesses experienced an increase in their cost of doing business, while 65% reported increased revenue but only 47% reported a corresponding increase in profits.

That distinction is critical. Revenue growth is not necessarily profit growth. A business can sell more and still become financially weaker if its cost of running the business increases faster than revenue.

This is why the future of Nigerian small businesses must involve a transition from simply pursuing sales to actively managing productivity and profitability.

Formalisation Should Become a Growth Strategy

Formalisation is often presented as a regulatory obligation. It should also be understood as a potential business-development strategy.

Registering a business, maintaining proper financial records and separating personal finances from business finances can help create the documentation and structure required for accessing formal financial services and larger commercial opportunities.

Digital financial services may support this transition, but they do not automatically cause businesses to register or become tax-compliant. Formalisation also depends on incentives, awareness, affordability, trust and the perceived benefits of entering the formal system.

Changing the Mindset About Small Business

There is still a tendency to associate success with large offices, multinational corporations, government positions or highly visible companies. Consequently, a woman selling food by the roadside may not be perceived as an entrepreneur in the same way as the founder of a technology company.

But the difference may not always be entrepreneurial ability. Sometimes the difference is scale, structure, capital, technology, networks and access to opportunity.

The small business owner of today could potentially become the employer of tomorrow. The retailer could become a distributor. The food vendor could become a catering company. The fashion designer could become a clothing manufacturer. The mechanic could establish an automobile service company. The farmer could become an agro-processing enterprise.

The Future: From Informal Businesses to Growth-Oriented Enterprises

The future of Nigerian MSMEs should therefore not be measured simply by the number of businesses created. It should also be measured by how many survive beyond five years, become formally registered, create employment, adopt digital technologies, maintain proper financial records, access productive finance, move from micro to small and from small to medium scale, enter larger value chains and create wealth beyond the immediate household.

Nigeria needs millions of businesses that do not merely survive the economy but participate in transforming it.

A New Philosophy: Business as a Ladder

Stage 1 — Survival — The business provides food, rent and basic household needs.

Stage 2 — Stability — The business consistently generates income and maintains working capital.

Stage 3 — Structure — The owner introduces accounting, registration, systems, technology and proper management.

Stage 4 — Expansion — The business acquires more customers, employees, equipment and market share.

Stage 5 — Scale — The enterprise enters larger markets, supply chains and institutional contracts.

Stage 6 — Wealth Creation — The business becomes an enduring enterprise capable of creating employment, generating investment returns and transferring wealth across generations.

The tragedy is not that Nigerians start businesses for survival. The tragedy would be if survival becomes the permanent destination.

Conclusion: Rising to a Greater Height

The future of small and medium-sized businesses in Nigeria will depend on whether the country can transform entrepreneurship from a coping mechanism into an engine of sustainable economic development.

Nigeria does not necessarily lack entrepreneurs. It has millions. What it needs is an ecosystem capable of helping those entrepreneurs move from informal activity to structured enterprise, from daily transactions to productive investment, from individual survival to employment creation, and from small-scale operation to sustainable growth.

Fintech has already demonstrated what is possible by bringing financial services closer to millions of previously underserved businesses. But the next frontier must go beyond payments. It must include finance, data, digitalisation, business education, formalisation, market access, infrastructure, mentorship and strategic management.

The small business owner should not be viewed merely as someone trying to survive another day. They should be viewed as a potential employer, producer, investor, innovator, taxpayer and contributor to national development.

The task before Nigeria is therefore not simply to create more small businesses. It is to help the small businesses that already exist rise to a greater height.

Because the ultimate measure of entrepreneurship should not be: ‘Did this business help the owner survive?’ but rather: ‘Did this business create the capacity for the owner, the employees, the community and the wider economy to prosper?’

References

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Central Bank of Nigeria. (n.d.). Financial inclusion. https://www.cbn.gov.ng/FinInc/

Moniepoint. (2024). Nigeria informal economy report 2024. https://www.2024informaleconomyreport.moniepoint.com/

Moniepoint. (2025). 2025 informal economy report: Nigeria’s informal economy. https://informalreport.moniepoint.com/

Nkechika, C. G. (2022). Digital financial services and financial inclusion in Nigeria: Milestones and new directions. CBN Economic and Financial Review, 60(4), 151–170. https://dc.cbn.gov.ng/efr/vol60/iss4/12/

Ogunsola, M. O., & Aderemi, H. O. (2026). Digital financial services and the formalisation of informal enterprises in Nigeria: A policy review. CBN Bullion, 50(2). https://dc.cbn.gov.ng/bullion/vol50/iss2/6/

Shah, K. M., Owuor, V. A., & Heitmann, S. (2022). Market Bite Nigeria: Innovation offers key to the broader MSME finance market. International Finance Corporation, World Bank Group. https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099055202202331735

Small and Medium Enterprises Development Agency of Nigeria, & National Bureau of Statistics. (2017). National survey of micro, small and medium enterprises (MSMEs) 2017. https://nigerianstat.gov.ng/pdfuploads/MSMEs_Report_2017%20fn%20sgof.pdf

World Bank. (2025, December 22). World Bank approves $500 million to expand finance for small businesses in Nigeria. https://www.worldbank.org/en/news/press-release/2025/12/22/world-bank-approves-500-million-to-expand-finance-for-small-businesses-in-nigeria