Unregistered businesses in Nigeria: A persistent challenge with a glimmer of hope
A recent survey has revealed a surprising reality: despite a slight uptick, a staggering 54% of Nigerian businesses remain unregistered. This statistic paints a complex picture of the country's entrepreneurial landscape, one that is both encouraging and concerning.
The 2025 State of Entrepreneurship Survey, conducted by FATE Foundation, offers a glimpse into the formalization journey of Nigerian entrepreneurs. While the report highlights a modest improvement, with 46% of entrepreneurs operating formally registered businesses in 2025 (up from 42% in 2024), the fact remains that over half of enterprises still operate informally.
But here's where it gets controversial: the survey data reveals a five-year trend of volatile formalization rates. The proportion of unregistered businesses has fluctuated, reaching a peak of 58% in 2024 before slightly easing in 2025. This volatility suggests that the path to formalization is far from straightforward.
Analysts attribute the marginal recovery to a gradual restoration of confidence in regulatory processes, aided by digital registration platforms introduced by the Corporate Affairs Commission (CAC). However, structural challenges persist, particularly for nano and micro enterprises, which dominate the business landscape. Limited access to information, mistrust of public institutions, and an unfavorable perception of registration costs continue to discourage formalization.
Among formally registered businesses, the survey sheds light on the primary registration body: the CAC. More than two-thirds of registered enterprises are affiliated with the commission, a pattern consistent with previous years. However, there are signs of gradual diversification, with registrations with the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) increasing from 19.1% in 2024 to 24.7% in 2025. Formal trade groups and associations are also gaining traction, with a rise in registrations from 6% to 7.5% in 2025.
The report further emphasizes the role of business age in registration status. Enterprises less than a year old exhibit the highest informality rates, although conditions have improved year-on-year. In 2025, 68.2% of new businesses were unregistered, a notable decline from 82% in 2024. For firms under 5 years old, 63% operated informally in 2025, a marginal improvement from the previous year.
Adenike Adeyemi, Executive Director at FATE Foundation, highlights the survey's findings: "Overall, we see incremental gains in formalization across both new and established businesses. However, the persistently high informality among younger firms underscores the enduring structural barriers, including procedural costs, weak incentives, and the limited perceived value of formal registration."
This survey provides valuable insights into the challenges and opportunities facing Nigerian entrepreneurs. While the data suggests a gradual shift towards formalization, the deep-rooted informality across the entrepreneurial ecosystem remains a significant hurdle. As we navigate these complexities, one question arises: How can we further encourage and support the formalization process to foster a thriving business environment in Nigeria? Feel free to share your thoughts and insights in the comments below!
