With inflation driving up the prices of goods and services almost daily, Nigerians are losing their purchasing power, and businesses are shutting down due to a lack of patronage.
Mama Emma, 62, sells groundnuts and bananas by the roadside at Total Junction in Zone 3 of the Wuse district of Abuja, Nigeria's federal capital city. It has been her trade and means of livelihood for over two decades.
"I used money from the business to train my children in private primary and secondary schools," she says in an interview with PREMIUM TIMES, recalling a past "when the economy was good.".
However, since 2023, the economic hardship following the removal of fuel and currency subsidies by President Bola Tinubu has pushed her to the edge.
Two of her sons attend a public university in Keffi in neighbouring Nasarawa State. Mama Emma is afraid they may drop out due to financial constraints. "I can't afford their fees anymore," she says. "We don't even have enough food at home."
She sold a bottle of groundnuts for N400 about two years ago. "Now we sell for between N1,500 and N1,800, so people don't buy again. I have lost almost all my customers."
No longer able to buy her stock in bulk from local markets in Garam, Kuduru, Aji, and Zuma, Mama Emma now depends on credit supply from wholesalers in the Bwari Area Council where she lives.
"I don't have money to buy in bulk anymore," she explains, her voice conveying her frustration.
Many small business owners in the Federal Capital Territory have similar stories to tell. With inflation driving up the prices of goods and services almost daily, Nigerians are losing their purchasing power, and businesses are shutting down due to a lack of patronage.
Informal Sector
The informal sector is a vital part of the Nigerian economy. It comprises businesses such as street vendors, subsistence farmers, and small-scale manufacturers and accounts for over half of the country's employment. For many Nigerians, the sector is a fallback and a critical lifeline.
Nigeria's economic hardships have deepened in recent months, exacerbated by shocks from the removal of fuel subsidies and the devaluation of the naira, the nation's currency. President Bola Tinubu introduced those measures in 2023 to stabilise the economy. Instead, they have driven up the cost of essential goods and services and pushed tens of millions of Nigerians into abject poverty.
In July, the National Bureau of Statistics (NBS) reported a slight decrease in the inflation rate to 33.4 per cent, from 34.19 per cent in June. While this offered some relief, the cost of living remains painfully high.
Despite the slight easing in inflation, Nigerians continue to struggle under rising prices. Food inflation is a critical concern, soaring to 39.53 per cent year-on-year in July, up 12.55 percentage points from July 2023.
In this challenging environment, the informal economy continues to operate as a crucial force, particularly for young Nigerians. Moniepoint, a financial services company, reports that 58 per cent of informal economy business owners are under the age of 34, and nearly half are between 25 and 34.
Many entrepreneurs are driven by necessity, as formal employment opportunities are scarce. According to the report, 51.6 per cent of business owners started their ventures because of job scarcity, making the informal sector a critical safety net for millions of Nigerians.
Contrary to the common perception of tax evasion, the sector also contributes significantly to government revenues through levies and other measures.
Significant Challenges
The report highlights that while 72.3 per cent of these businesses generate over N1 million monthly, nearly 90 per cent return less than N500,000 monthly. This underscores the harsh economic conditions in which many operate, where high operating costs and thin margins often limit profitability and growth.
Access to credit is another significant barrier. While 70 per cent of informal businesses have obtained some form of credit, most rely on personal networks -such as friends and family - rather than formal financial institutions. Only 12.2 per cent of businesses obtain loans from traditional banks.
This overreliance on personal connections points to gaps in Nigeria's formal financial services. High interest rates and strict loan requirements make institutional credit challenging to access for many small business owners.
Another factor affecting the informal sector in Nigeria is the shift in payment methods from cash to cards.
In 2024, Moniepoint data shows that card payments now account for 80.2 per cent of transactions, more than four times the rate of online transfers (19.8 per cent). This shift towards digital payments was spurred by a cash shortage in early 2023 when the central bank redesigned the naira. The cash shortage forced many businesses to adapt quickly.
Despite the challenges, Nigeria's informal economy remains a key player in the nation's development, driven by the energy and resilience of young entrepreneurs creating opportunities for themselves and their communities.
Mama Mairo, 65, who, like Mama Emma, has sold groundnuts and bananas for 30 years, says her income has seen her children through school.
"I started small and gradually expanded the business. But now, customers don't have money. Before, I could take N2,500 or N3,000 to the market for bulk purchases. Now, I need N20,000 to N30,000," she says.
Mama Mairo also no longer goes to the bush markets. "I buy on credit and pay back daily," she says.
Both women are frustrated about the rising prices and their dwindling profits. Mama Emma says her health has deteriorated due to her time in the scorching sun. "I always come to the street with my drugs since I cannot stop selling. My husband is a retiree. I provide everything in the house, so the headache cannot stop me," she adds.
Taxi drivers under pressure
Ambrose Moses, 40, is the acting chairman of the taxi drivers' association at Nicon Junction Park. He says taxi operations in Abuja are made challenging by the high price of petrol and the poor state of infrastructure, such as parks and bus terminals.
"There's no legal park in Abuja," Mr Moses says. "The government sends Vehicle Inspection Officers (VIOs) to raid us, calling our parking areas illegal."
Mr Moses remembers when a litre of petrol cost just N70, and the fare for a trip from Nicon Junction to the Federal Secretariat was N100. Now, the fare is N400. He watched alarmingly as the price of petrol rose from N626.70 in August 2023 to N897 per litre in September 2024.
"It feels like we are working just to buy fuel," Collins Nwa-Abasi, 50, a driver at Life Camp, says.
"But when petrol prices go up, and we raise fares, the passengers resist," Mr Nwa-Abasi laments. "We're working harder but earning less."
The drivers also face harassment from road safety enforcement agencies like the VIO. Mr Nwa-Abasi says towing fees (for broken down or clamped vehicles) have ballooned from N5,500 to over N100,000. "The VIO task force has turned this into a business," he says.
The rise of ride-hailing services like Uber and Bolt has also introduced new challenges. However, Mr Moses is unfazed by their threat.
"Uber has its customers, but we have loyal passengers who can't afford it," he notes.
Mr Nwa-Abasi says while the platforms are popular among younger customers, traditional drivers have a loyal customer base.
Loan scheme: A failed endeavour
Despite their struggles, many informal business owners are unaware of the federal government's Presidential Conditional Grant Scheme (PCGS), which was created to support small businesses.
The scheme started in March but has faced criticism from experts like the Chief Economist at SPM Professionals, Paul Alaje, who says it fails to address the needs of hawkers and small business operators and calls for its reversal.
In a phone interview with this newspaper, Mr Alaje calls instead for a micro-credit scheme managed through associations that informal sector traders already belong to.
He says that this system would enable small businesses to access loans at minimal interest rates, potentially stabilising their finances and fostering long-term growth.
"These small businesses are vital, especially in urban areas like Abuja where formal employment opportunities are scarce," he notes.
Mr Alaje says the informal sector contributes around 65 per cent to the country's Gross Domestic Product (GDP). Despite this significant role, he laments that informal workers lack access to financial services, social protection, and decent working conditions, making them vulnerable to economic fluctuations and government policy changes.
He says government policies designed to support the sector, such as microcredit schemes, have been hampered by bureaucratic obstacles and insufficient outreach.
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"The government's microcredit schemes need to be more accessible and better tailored to the needs of informal sector workers," Mr Alaje argues.
"Community support is vital for these workers," he says, stressing that these organisations bridge the gaps in government policies.
He says advocacy efforts by groups such as WIEGO and local NGOs are pushing for policy changes that better support the informal economy.
However, Mr Alaje is excited by the transformative potential of technology for the informal sector. He says mobile banking, digital marketplaces and e-learning platforms offer new avenues for financial inclusion and market access, potentially addressing some of the gaps in existing policies.
"Leveraging technology can revolutionise the informal sector, providing new opportunities for growth and resilience," he says.
Another solution Mr Alaje proffered is a micro-credit system that allows small businesses to access capital for inventory, business expansion, or investments in technology.
He explains that such a system could be designed with flexibility in mind, aligning repayment schedules with traders' cash flow cycles and reducing the burden of debt during lean periods.
By leveraging trade associations, Mr Alaje says the initiative could reach more small business owners, ensuring more equitable access to resources.
"Collaboration with local financial institutions, including partnerships with banks and microfinance organisations, would be key to streamlining the loan process and enhancing the initiative's credibility."
Additionally, Mr Alaje proposes incorporating a mentorship programme where successful entrepreneurs could guide new traders through the complexities of running a business. "This mentorship, combined with financial literacy training, would help traders make informed decisions and increase their profitability over time," he says.
Ministry remains silent
To clear the confusion surrounding the N50,000 PCGS, PREMIUM TIMES contacted Felicia Adeyemo, the Assistant Director of Press at the Ministry
of Industry, Trade and Investment. However, Mrs Adeyemo stated that she was unaware of the funds, highlighting a troubling gap in communication within the ministry.
