A recent survey reveals a stubborn truth about Nigeria’s entrepreneurial landscape: 54% of businesses remained unregistered in 2025, even as there are signs of a modest uptick in formalization. The 2025 State of Entrepreneurship Survey from FATE Foundation shows 46% of Nigerian entrepreneurs operated formal, registered businesses in 2025, up from 42% in 2024. Yet more than half of all enterprises—54%—still run informally, underscoring how deeply informality is rooted in the country’s business ecosystem.
The report repeats a five-year pattern of volatility in formalization. Unregistered businesses accounted for 44% in 2021, climbed to 51% in 2022, rose to 53% in 2023, peaked at 58% in 2024, and eased slightly in 2025. Analysts interpret the marginal rebound as a sign that confidence in regulatory processes is gradually returning, helped in part by digital registration platforms rolled out by the Corporate Affairs Commission (CAC).
Nonetheless, structural obstacles continue to deter formalization, especially for nano and micro enterprises that dominate Nigeria’s market. Core barriers include limited access to information, distrust of public institutions, and a cost-benefit perception that often makes registration seem less worthwhile.
Among those businesses that are formally registered, CAC remains the dominant agency. More than two-thirds of registered firms report affiliation with the commission, a finding that aligns with trends from prior years.
The survey also indicates gradual diversification in registration channels. Registrations with the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) rose from 19.1% in 2024 to 24.7% in 2025. Likewise, the share of businesses joining formal trade groups and associations climbed to 7.5% in 2025 from 6% in 2024. Cooperative societies and local trade associations are gaining traction too, signaling a preference among small firms for semi-formal recognition rooted in trust networks and community validation.
The data show that business age strongly influences registration status. Younger firms tend to be more informal, though the situation is slowly improving. In 2025, 68.2% of new ventures remained unregistered—a drop from 82% in 2024. For firms younger than five years, 63% operated informally in 2025, slightly better than 64% in 2024. This trend points to rising awareness and a gradual uptake of registration processes among early-stage entrepreneurs.
Adenike Adeyemi, Executive Director of FATE Foundation, commented: “Overall, the survey demonstrates incremental gains in formalization across both new and established businesses. Yet the persistently high informality among younger firms highlights enduring structural barriers—such as procedural costs, weaker incentives, and the limited perceived value of formal registration.”
And here’s a provocative takeaway: if more small players begin to see real benefits from registering, Nigeria could accelerate formalization even without sweeping policy changes. But the big question remains—will the improvements translate into meaningful incentives and simplified procedures that convince the smallest enterprises to go formal, or will informality persist as the default operating model for Nigeria’s vibrant but cash-strapped startup culture?
