More than half of Nigerian businesses remain unregistered, despite a slight rebound in formalization. This startling fact, revealed by the 2025 State of Entrepreneurship Survey conducted by FATE Foundation, highlights a persistent challenge within Nigeria's entrepreneurial landscape. While 46% of Nigerian entrepreneurs operated formally registered businesses in 2025, up from 42% in 2024, a staggering 54% still operate in the shadows, unregistered and potentially missing out on crucial benefits.
This trend, though showing a modest improvement, paints a picture of an entrepreneurial ecosystem deeply rooted in informality. But here's where it gets controversial: is this a sign of entrepreneurial spirit thriving outside the confines of bureaucracy, or a symptom of systemic barriers hindering growth and development?
The survey data reveals a rollercoaster ride in formalization over the past five years. From 44% unregistered businesses in 2021, the figure climbed to a peak of 58% in 2024 before dipping slightly to 54% in 2025. Analysts attribute this marginal recovery to increased confidence in regulatory processes, partly fueled by the introduction of digital registration platforms by the Corporate Affairs Commission (CAC).
However, the report doesn't shy away from pointing out the elephant in the room: structural challenges remain a significant deterrent to formalization, particularly for nano and micro enterprises, the backbone of Nigeria's business landscape. Limited access to information, deep-seated mistrust of public institutions, and the perception of registration as a costly and bureaucratic burden are major hurdles.
And this is the part most people miss: even among registered businesses, there's a gradual shift happening. While CAC remains the dominant registration body, with over two-thirds of registered enterprises affiliated with it, registrations with the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) are on the rise, increasing from 19.1% in 2024 to 24.7% in 2025. This diversification suggests a growing awareness of alternative registration options and potentially a desire for more tailored support.
Interestingly, the survey also highlights the role of community and trust in the registration landscape. The proportion of businesses registered with formal trade groups and associations rose to 7.5% in 2025, indicating a preference for semi-formal recognition within established networks. Cooperative societies and local trade associations are gaining traction, particularly among smaller firms seeking validation and support from their peers.
The age of a business also plays a crucial role in its registration status. New businesses, less than a year old, face the highest informality rates, though there's a glimmer of hope as these rates have declined from 82% in 2024 to 68.2% in 2025. This suggests a growing awareness of the importance of registration among early-stage entrepreneurs, albeit at a gradual pace.
Adenike Adeyemi, Executive Director at FATE Foundation, emphasizes the incremental progress but acknowledges the persistent challenges: “While we see positive trends, the high informality rates among younger firms highlight enduring structural barriers – procedural costs, weak incentives, and the limited perceived value of formal registration.”
This survey raises important questions: How can we further streamline registration processes to make them more accessible and attractive to all businesses, especially the smallest ones? What role can government agencies and community organizations play in building trust and incentivizing formalization? Is the current registration system truly serving the needs of Nigeria's diverse entrepreneurial landscape, or does it need a fundamental rethink?
The conversation around business formalization in Nigeria is far from over. This survey provides valuable insights, but it also opens up a space for debate and discussion. What are your thoughts? Do you believe the benefits of formal registration outweigh the costs? Share your perspectives in the comments below.
