Despite a slight increase in formal business registration, Nigeria's entrepreneurial landscape still faces significant informal practices. A recent survey reveals that 54% of businesses in Nigeria remained unregistered in 2025, indicating a modest rebound in business formalization after years of decline. This trend highlights the deep-rooted informality within the country's entrepreneurial ecosystem. The report, conducted by FATE Foundation, shows that 46% of Nigerian entrepreneurs operated formally registered businesses in 2025, up from 42% in 2024. However, the data also shows that more than half (54%) of enterprises still operate informally, underscoring the persistent challenges in formalizing businesses. The survey analyzed a five-year trend, revealing a volatile pattern in formalization. The share of unregistered businesses stood at 44% in 2021, rising to 51% in 2022 and 53% in 2023, before peaking at 58% in 2024 and easing slightly in 2025. Analysts attribute this marginal recovery to a gradual return of confidence in regulatory processes, partly facilitated by digital registration platforms introduced by the Corporate Affairs Commission (CAC). Despite this improvement, structural challenges persist, particularly among nano and micro enterprises that dominate Nigeria's business landscape. Key constraints include limited access to information, mistrust of public institutions, and an unfavourable cost-benefit perception surrounding registration. Among formally registered businesses, the survey revealed that the CAC remains the primary registration body, with over two-thirds of registered enterprises reporting affiliation with the commission. However, there is a gradual diversification in registration patterns. Registrations with the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) rose from 19.1% in 2024 to 24.7% in 2025. Similarly, the proportion of businesses registered with formal trade groups and associations increased to 7.5% in 2025, up from 6% a year earlier. Cooperative societies and local trade associations are also gaining traction, reflecting a preference among small firms for semi-formal recognition built on trust networks and community validation. The report further highlights that business age remains a strong determinant of registration status. Enterprises less than one year old recorded the highest informality rates, though conditions 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 64% the previous year. This trend suggests rising awareness and gradual adoption of registration processes among early-stage entrepreneurs. Adenike Adeyemi, Executive Director at FATE Foundation, emphasized that the survey shows incremental gains in formalization across both new and established businesses. However, the persistently high informality among younger firms highlights enduring structural barriers, including procedural costs, weak incentives, and the limited perceived value of formal registration.
