A recent survey has revealed a modest rebound in business formalisation in Nigeria, with 46 percent of entrepreneurs reporting formally registered enterprises in 2025, up from 42 percent in 2024. Despite the improvement, a larger proportion—54 percent—still operate unregistered businesses, highlighting the persistent challenge of informality in the country’s entrepreneurial landscape.
The findings come from the 2025 State of Entrepreneurship Survey conducted by FATE Foundation, which tracks trends in business registration and enterprise development. Analysis of the data shows a five-year pattern of volatility: the share of unregistered businesses stood at 44 percent in 2021, rising steadily to 51 percent in 2022, 53 percent in 2023, peaking at 58 percent in 2024, before easing slightly in 2025.
Analysts suggest the marginal recovery reflects growing confidence in regulatory processes, partially aided by digital registration platforms introduced by the Corporate Affairs Commission (CAC). Yet, structural challenges continue to discourage formalisation, particularly among nano and micro enterprises, which dominate the Nigerian business ecosystem. Constraints cited include limited access to information, mistrust of public institutions, and perceptions that registration costs outweigh benefits.
Among formally registered businesses, CAC remains the dominant registration body, with more than two-thirds of enterprises reporting affiliation. However, the survey indicates gradual diversification. Registrations with the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) rose from 19.1 percent in 2024 to 24.7 percent in 2025. Similarly, registration with formal trade associations increased to 7.5 percent from 6 percent a year earlier. Cooperative societies and local trade associations are also gaining traction, reflecting a preference among smaller businesses for semi-formal recognition built on trust networks and community validation.
Business age remains a strong determinant of formalisation. Enterprises less than one year old continue to record the highest informality rates, although conditions are improving. In 2025, 68.2 percent of new businesses were unregistered, down from 82 percent in 2024. For firms under five years old, 63 percent operated informally, a marginal improvement from 64 percent the previous year. The trend suggests rising awareness and gradual adoption of registration processes among early-stage entrepreneurs.
Adenike Adeyemi, Executive Director at FATE Foundation, noted: “Overall, the survey shows incremental gains in formalisation across both new and established businesses. Yet, persistently high informality among younger firms highlights enduring structural barriers – including procedural costs, weak incentives, and the limited perceived value of formal registration.”
The survey underscores the ongoing challenge for policymakers seeking to boost business formalisation, with implications for taxation, regulatory oversight, and access to finance for small and growing enterprises.
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