The Africa Retail Academy of Lagos Business School has warned that businesses targeting Africa’s informal economy risk failure when they impose strategies designed for formal institutions without understanding local market realities.
The Academic Director of the Africa Retail Academy, Prof. Uchenna Uzo, said most businesses failed in informal markets because they did not understand how the markets operated.
He spoke at the Africa Retail Academy, Lagos Business School executive programme, winning in Africa’s Informal Economy, held in Lagos on 28 and 29 July.
According to a statement, Uzo said organisations must discard the assumption that informal markets were disorganised, illegal or simply waiting to be formalised, noting that the sector had its own structures, governance systems and networks.
“Most businesses fail because they do not understand how the informal market works. There are three common myths that hinder our understanding of informal markets. The first is that informal markets are illegal markets. The second is that market players lack business acumen, and the third is that informal markets are a homogeneous block,” Uzo said.
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He added that 10 years of research had shown that informal markets operated across different levels of structure and included legitimate businesses, hybrid operators and grey market players.
“Insights from ten years of research show that the reality is different. Informal markets are largely fragmented and include grey market operators, hybrid markets that adopt both formal and informal sector practices, such as Nollywood and agency banking networks, and legitimate operators, such as registered businesses in the Kadogo economy of East Africa. The level of structure varies,” he said.
The programme brought together senior executives, policymakers and business leaders from the FMCG, investment, technology, healthcare, insurance, financial services, retail and public sectors to examine strategies for competing in Africa’s informal economy.
The Academy said informal trade accounted for more than 90 per cent of retail transactions across Africa, while Nigeria’s informal economy contributed about 48 per cent of economic output and 93 per cent of employment.
It said the figures demonstrated that informality remained central to African commerce rather than existing at the margins of the economy.
Participants examined the economic structure of informal markets, stakeholder mapping, political and cultural intelligence, distribution strategies, financial inclusion, route-to-market models and the role of trust in commercial relationships.
The Academy said organisations could not succeed by trying to formalise informal markets but by understanding and respecting the institutions and relationships that sustain them: “Organisations do not win in the informal economy by attempting to formalise it. They succeed by understanding how it works, respecting the institutions that sustain it and designing business models that align with its realities.”
The programme featured faculty members, including Uzo, Dr Doyin Salami, Dr Opeyemi Agbaje, Dr Nnamdi Ezeigbo, Ezekiel Sanni, Jubril Salaudeen, Prof Louis Nzegwu and Dr Belinda Nwosu.
The Academy used case studies from SLOT Systems Limited and Moniepoint to demonstrate how businesses could scale by working within existing market structures rather than attempting to replace them.
Participants also identified trust as a critical form of market infrastructure, stressing that businesses needed to establish legitimacy with market associations, community leaders and other influential stakeholders before introducing products or expanding distribution networks.
The programme ended with participants presenting implementation plans covering stakeholder engagement, market entry, distribution and customer engagement.
The event also featured the launch of a revised edition of Africa’s Goldmine, a publication examining the dynamics and opportunities in Africa’s informal economy.
The Academy urged interested applicants to register for the programme on its website.
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