Nigeria: Rising Interest Rates Push 51% of Informal Businesses Away from Loans — Moniepoint Report

A growing number of informal businesses in Nigeria are turning away from credit as borrowing costs rise and lending conditions tighten, according to the 2025 Informal Economy Report by Moniepoint.

The report reveals that 51% of respondents have never taken a loan and have no plans to do so, a sharp increase from 30% in the previous year. Moniepoint attributes this decline in credit appetite to higher interest rates and stricter loan requirements, which have made borrowing less attractive for small and informal enterprises.

Fear of default emerged as the top reason for avoiding loans, cited by 36% of respondents, while 26% said their businesses simply do not need credit. Another 13% pointed to high or inflexible repayment terms, and 11% preferred to rely on personal savings instead. The report also noted that women are more cautious than men about borrowing, mainly due to repayment concerns and interest costs.

Among those who do access loans, 47% use the funds to expand their businesses—through equipment purchases, renovations, or new outlets—while 28% use credit to restock. Smaller proportions use it to cover daily operations, emergencies, or personal needs.

Microfinance banks have become the leading credit providers for informal businesses, accounting for 22% of all loans, followed by digital banks (20%), commercial banks (18%), and cooperatives (13%). Women, however, continue to depend more heavily on informal sources such as thrift groups, family, and friends.

Access to substantial loans remains limited: one in three businesses reported receiving a maximum loan of ₦100,000 or less, while only 6% had ever secured loans exceeding ₦1 million. Male-owned businesses were found to be twice as likely as female-owned ones to access higher-value loans.

Speaking at the report’s launch in Abuja, the Special Adviser to the President on Job Creation and MSMEs, Temitola Adekunle-Johnson, expressed concern over the high cost of borrowing, urging financial institutions to design products that improve credit access for small businesses.

Also addressing the event, the Minister of Industry, Trade and Investment, Dr. Jumoke Oduwole, reaffirmed the Federal Government’s commitment to empowering Nigeria’s informal economy, which she described as the “heartbeat of the nation’s transformation.” Representing Vice President Kashim Shettima, Oduwole commended entrepreneurs for sustaining livelihoods and contributing significantly to trade and innovation.

She noted that over 39 million MSMEs contribute nearly half of Nigeria’s GDP and employ more than 80% of the workforce. Oduwole highlighted ongoing efforts to expand access to finance and markets, including integration into the African Continental Free Trade Area (AfCFTA) and the launch of a dedicated air cargo export corridor to Ugandato boost regional trade.

The minister also pointed to targeted interventions such as the SMEDAN Enterprise Support Programme and the $50 million Women Exporter to Digital Economy Fund, aimed at equipping women-led businesses with tools to compete in global value chains.

She assured that the government will continue to back innovators in technology, clean energy, and manufacturing, positioning Nigerian enterprises to scale across Africa.

SMEDAN Director-General Charles Odii emphasized the need to ease tax and regulatory burdens discouraging formalisation. He disclosed that SMEDAN is currently formalising 250,000 small businesses at no cost, an initiative valued at about ₦6 billion, and plans to list 1,000 small businesses on the Nigerian capital market in collaboration with the Securities and Exchange Commission (SEC).

Odii also announced initiatives such as co-working spaces, machinery hubs, and discounted logistics services to reduce operational costs for entrepreneurs.

Moniepoint Microfinance Bank Managing Director, Babatunde Olofin, described the informal economy as the “pulse of the nation,” stressing its role in sustaining millions of households. He noted that the 2025 report, backed by the International Finance Corporation (IFC), the Federal Ministry of Industry, Trade and Investment, and SMEDAN, provides critical insights to guide inclusive policy and drive meaningful impact for vulnerable communities.