Assessing Nigeria's Informal Economy: Insights from Fintech Adoption Rates

By 2023, 45% of adults had used a digital financial service in the past year¹. The proportion of people making digital payments for goods and services rose from 29% in 2020 to 40% in 2023¹. Additionally, 17% of adults received income via digital channels¹.Mobile money transaction volumes surged by 53% in 2024, reaching ₦71.5 trillion², reflecting the growing trust and reliance on fintech platforms.

Much of this activity is driven by Nigeria’s informal MSME sector, which constitutes the majority of businesses. Reports estimate that 89.4% to 97% of Nigeria’s approximately 40 million MSMEs are informal³⁴. Consequently, it follows that over 90% of fintech using businesses in Nigeria are informal.

For example, Moniepoint's report indicates that the vast majority of its 2 million business users are informal traders⁴. Among them:

• 92.4% save on fintech platforms rather than with traditional banks⁵.
• 15.1% have used mobile loan apps⁶.
• 70.1% have accessed some form of credit, mainly from informal sources⁶.
• Over 80% prefer to receive payments via cards or digital transfers⁵.

Gender and Regional Gaps

Fintech access remains uneven. In 2023, only 47% of women in Nigeria had a formal financial account compared to 58% of men⁷. This suggests lower fintech engagement among women. Additionally, financial exclusion is most pronounced in Northern and rural regions, where infrastructure and literacy gaps hinder adoption⁸.

Service Specific Usage Trends

Digital payments and wallets dominate fintech usage. By 2023, 40% of Nigerians made digital payments, and 17% received income digitally¹. In contrast, while digital savings are widely adopted among informal businesses (92.4%)⁵, digital lending remains less common, with only 15.1% using mobile loan apps⁶.

Key Challenges Facing Informal Businesses

Despite growing fintech adoption, informal MSMEs face multiple barriers:

• Limited access to formal credit: Many informal businesses lack credit history or collateral, excluding them from traditional loan systems.
• Low financial literacy: Informal traders often struggle to understand loan terms, digital interest rates, or savings instruments.
• Regulatory uncertainty: Operating without business registration limits access to government support or formal fintech programs.
• Technological access barriers: Inadequate smartphones, poor internet, and electricity issues hinder consistent fintech usage.
• Trust issues: Fear of scams or hidden charges still deters some informal businesses from engaging with digital platforms.

How Innovation Can Bridge the Gaps

1. Alternative credit scoring using transactional data: Platforms can assess creditworthiness using payment history and cash flow data, bypassing the need for formal records.
2. Offline compatible fintech tools: SMS based interfaces, USSD codes, and low data apps can expand access in low connectivity areas.
3. Micro loans and flexible repayment models: Loan products tailored to daily or weekly repayment cycles can suit the cash flow patterns of informal traders.
4. Digital ID and KYC simplification: National identity systems and facial recognition can streamline onboarding for unregistered businesses.
5. Community based fintech agents: Trained local agents can support onboarding, training, and customer service in local dialects.
6. Gamified financial education: Using mobile based games and short videos can help teach financial literacy in engaging, bite sized formats.

• Over 90% of fintech using businesses in Nigeria are informal MSMEs.
• Fintech adoption is high for payments and savings, but still developing for digital credit.
• Women and rural/Northern populations continue to face access barriers.
• Informal businesses are not just users but drivers of fintech growth in Nigeria.
• Addressing core challenges through targeted innovations can unlock even greater potential across Nigeria’s massive informal sector.

References

1. EFInA. (2023). Access to Financial Services in Nigeria 2023 (A2F) Survey.
2. Proshare. (2024). Mobile Money Transaction Volumes Hit ₦71.5 Trillion in 2024.
3. IFC. (2023). Nigeria MSME Finance Gap Report.
4. Moniepoint. (2024). The Informal Economy Report: Survey of 2 Million Businesses.
5. Moniepoint. (2024). How Informal Businesses Save and Get Paid in Nigeria.
6. Moniepoint & Techpoint. (2024). Credit Access Among Informal Traders in Nigeria.
7. Women’s World Banking / EFInA. (2024). Gender and Financial Inclusion in Nigeria.
8. EFInA. (2023). Financial Exclusion by Region and Demographics. Nigeria A2F Survey.