More informal businesses in Nigeria are turning away from credit due to rising interest rates and stricter lending conditions.
The 2025 Informal Economy Report by Moniepoint shows that 51 per cent of respondents have never taken a loan and do not intend to do so, up from 30 per cent in the previous year.
“While 30 per cent of respondents reported not borrowing for their business in our previous report, that figure increased to 51 per cent in this report.
“This shows a decline in credit appetite across the informal and small business landscape. A major reason for this could be tighter lending conditions and a higher interest environment,” the report read.
The report further reveals that fear of being unable to repay is the leading reason for avoiding loans, cited by 36 per cent of operators.
About 26 per cent said their businesses do not need loans, while 13 per cent blamed high or unfavourable repayment terms.
Another 11 per cent preferred to use savings or personal funds for business needs. Women were found to be more likely than men to avoid borrowing due to concerns about repayment and interest costs.
Among businesses that access credit, most use it to expand operations. About 47 per cent of borrowers reported spending loans on equipment, renovations, or opening new outlets, while 28 per cent used funds to purchase stock.
A further 12 per cent relied on credit to cover daily expenses, and smaller shares used it for emergencies or personal needs.
Microfinance banks are now the most common source of loans for informal businesses, accounting for 22 per cent of borrowing.
Digital banks and lenders followed with 20 per cent, and commercial banks with 18 per cent. Cooperatives made up 13 per cent, while family, friends, thrift groups and private lenders provided smaller shares.
The report noted that women continue to rely more on informal sources than men.
Access to large loans remains rare. One in three businesses said the highest loan they ever received was N100,000 or less, while only 6 per cent reported loans above N1m. Male-owned businesses were found to be twice as likely as female-owned firms to secure loans above that level.
Speaking at the launch of the event on Friday in Abuja, the Special Adviser to the President on Job Creation and Micro, Small and Medium-sized Enterprises, Temitola Adekunle-Johnson, lamented the high costs of borrowing in the country.
He urged other financial service providers to design products that ease access to finance for small businesses.
Also speaking, the Minister of Industry, Trade and Investment, Dr. Jumoke Oduwole, said the Federal Government remained committed to supporting Nigeria’s informal economy as a key driver of innovation, trade and continental integration.
Oduwole, who represented Vice-President Kashim Shettima, described informal businesses as the “heartbeat of Nigeria’s transformation” and central to the country’s economic resilience.
She praised entrepreneurs across the country for sustaining livelihoods and positioning Nigeria globally.
“From market creators to small service providers and young entrepreneurs, Nigerians continue to power commerce in ways that are indispensable to our economy,” she said.
According to her, the government is working to expand access to markets and finance for micro, small and medium enterprises, which account for the bulk of the country’s businesses and employment.
She noted that over 39 million MSMEs contribute close to half of national output and employ more than 80 per cent of the workforce.
Oduwole said Nigeria was positioning itself to harness opportunities in the African Continental Free Trade Area, describing the 1.4 billion-person regional market as “a real and unfolding marketplace, not just a concept.”
She explained that the government had already integrated AfCFTA tariff concessions into trade routes and, in May, launched a dedicated air cargo export corridor to Uganda to fast-track Nigerian products into regional markets.
She highlighted targeted interventions aimed at empowering small businesses, including the SMEDAN Enterprise Support Programme.
She also pointed to the Women Exporter to Digital Economy Fund, a $50m programme launched in August to provide female entrepreneurs with tools, networks and knowledge to participate in global value chains.
The minister stressed that the administration would continue to back innovators in technology, clean energy and manufacturing, ensuring that Nigerian enterprises scale across Africa.
“The government stands ready to support our innovators as they build their footprint, particularly across the African continent,” she said.
In his remarks, the Director-General of the Small and Medium Enterprises Development Agency of Nigeria, Charles Odii, said that Nigeria’s informal economy remains central to livelihoods but noted that taxes and high operating costs continue to discourage formalisation.
Odii explained that the first edition of the report sampled two million businesses, while the new study covered no fewer than five million.
He said this expansion reflected the agency’s determination to ground policy decisions in real data from the ecosystem.
According to him, Nigeria has about 39 million SMEs, most of which remain informal because of tax burdens.
He also welcomed the recent tax law signed by President Bola Tinubu. “This means more small businesses can now come into the formal net,” he said.
Odii disclosed that SMEDAN had launched new interventions to ease the cost of doing business, including co-working spaces equipped with machinery and subsidised logistics discounts of up to 50 per cent.
He said the agency was also formalising 250,000 small businesses at no cost, an initiative worth about N6bn.
He added that SMEDAN was working with the Securities and Exchange Commission to list 1,000 small businesses on the capital market to ensure such businesses have more capital.
Speaking earlier, the Managing Director of Moniepoint Microfinance Bank, Mr. Babatunde Olofin, said the Informal Economy Report remained a vital tool for understanding Nigeria’s most defining economic sector and guiding inclusive policy.
Olofin described the informal economy as the “pulse” of the nation, stressing that it sustains millions of households despite often being overlooked.
Olofin explained that the report was not just a study but a mirror of economic reality, backed by the International Finance Corporation, the Federal Ministry of Industry, Trade and Investment, SMEDAN and other partners.
He called for collective action to transform the findings into lasting impact, saying the goal was to ensure vulnerable households were not left behind.
