Moniepoint, a prominent fintech company in Nigeria with one of the most extensive agent networks in the country, has released its first-ever informal economy report. The report offers valuable insights into the financial behaviors and digital payment trends within Nigeria’s informal economy. It draws from data collected from over 2 million Nigerian businesses that became part of its platform between 2019 and 2024. The report excludes data from thousands of agents. The findings from the report are as follows:
1. Card Payments Dominate Offline Transactions:
Approximately 80% of the 2 million businesses surveyed by Moniepoint prefer card payments over transfers for in-person transactions. This contrasts with online payments, which are predominantly characterized by online transfers, as reported by the Central Bank of Nigeria. The digital payments sector exhibited notable growth in 2023, attributed to a cashless policy that resulted in a scarcity of cash and subsequently drove the adoption of digital payment methods among many Nigerians. Even after the policy was reversed, Nigerians continued to favor digital payments, with companies like Moniepoint processing 5.2 billion transactions, thus becoming integral to daily life.
2. Lagos: Nigeria’s Commercial Hub:
Despite being Nigeria’s smallest state, Lagos remains its commercial powerhouse. Since Nigeria’s independence, Lagos has been a crucial economic hub due to its strategic location and its status as the country’s former capital. The state accounts for 15% of Nigeria’s informal economy, second only to the North Central region, known as the nation’s agricultural center and home to the current capital, and the South West region, wherein Lagos is situated.
3. Preference for Loan Apps Over Banks:
Nigerian businesses have increasingly favored loan apps as a source of credit over traditional banks. Small businesses and individuals typically do not have access to loans from commercial banks, making loan apps an attractive alternative. A report from 2023 indicates that credit usage in Nigeria stands at only 6%. While borrowing from friends and family remains the preferred option within the informal economy, loan apps have become the second choice, surpassing traditional banks.
4. Digital Platforms Favored for Savings:
The report indicates that 92.4% of informal businesses save money, with a preference for digital platforms over traditional banks. This underscores the growing influence of fintech companies in Nigeria. Nearly half of the informal economy’s savings are managed through cooperatives and contributions, which are frequently operated by members of the informal sector. For fintech companies, customer deposits represent a significant advantage, as these funds can be utilized to provide loans to other customers.
5. Young Nigerian Businesses:
Over 80% of the respondents indicated that their businesses are less than five years old, signifying a concerning trend of short business lifespans. The majority of businesses are between 2 to 5 years old, followed by those that are between six months to a year old. This trend suggests that many businesses in Nigeria’s informal economy are relatively young and may encounter challenges in achieving long-term sustainability.
