“Did you know? Every ₦1 you spend on insurance can now lower your taxable income under Nigeria’s new Finance Act. For traders and artisans, that’s not just protection against disaster, it’s smart tax savings. That’s similar to killing two birds with a stone — your hustle is protected and your taxes are reduced too. why let FIRS take more when you can keep more? While you shield your business from floods, theft, or fire, you also shield your income from higher tax bills.”

Understanding the Informal Sector in Nigeria

Nigeria’s informal sector has been the heartbeat of the economy for many years. From traders , okada riders, tailors, sewage collectors, electricians, carpenters, hairdressers and farmers millions of Nigerians run small businesses that power GDP. According to the National Bureau of Statistics (NBS), this sector contributes over 50% of GDP and employs more than 60% of the workforce. Yet, most operate without retirement plans, job security, or employer-backed insurance, unlike the formal workers. 

But, this sector is highly vulnerable to risks such as:

• Illness or accidents
• Fire outbreaks or floods
• Theft or loss of goods
• Legal liability
• Business interruption

Why Insurance is Essential for the Informal Sector

1. Protection from Total Financial Loss

When disaster strikes, a person without insurance starts from zero. With insurance, you have a cushion.

Take Amaka, a large scale plantain trader in Onitsha market. When fire gutted her shop, her cooperative-based fire policy paid ₦150,000. She restocked and was back in business within 2 weeks. That’s the power of insurance—it turns “where do I start?” into “let’s rebuild.”

2. Access to Healthcare Without Fear of Bills

For many artisans, hospital bills are a bigger fear than the illness itself and insurance lowers the cost and makes it more affordable. HMOs now let informal workers access care for as little as ₦1,500 per month.

Isa, a keke rider got into an accident and was rushed to hospital. His emergency surgery bill ran into hundreds of thousands, but his micro health plan of just ₦1,000 per month covered it to a large degree. Today, Isa encourages other riders to sign up.

3. Business Continuity and Stability

Every small business owner fears downtime. With insurance, disruption doesn’t mean collapse.Many micro insurances can step in to pay daily income replacement in downtimes — while a person recovers from sicknesses, unforeseen circumstances and others. 

These payouts can keep things moving until one is back on their feet.  

4. Financial Planning and Credit Access

Many insurance plans also double as savings. Insurance also helps with access to loans. Banks see insured businesses as lower risk. Having insurance can make the difference between loan approval and rejection.

A tailor with insured sewing machines stands a better chance of getting a microloan than one without cover. 

Types of Insurance Relevant to the Informal Sector

Tax Laws: How Insurance Also Saves You Money

Nigeria’s recent Finance Acts quietly link insurance and taxation, but many don’t realize. Here’s what it means in plain terms:

Informal Workers (Self- Traders, Market Women, Drivers, Artisans)

• Insurance premiums = business expenses. Premiums (Insurance paid) for shop, tools, or vehicle insurance count as money spent on business. 
• Example: A mechanic in Ibadan earns ₦1,000,000 profit. He pays ₦20,000 insurance premium. His taxable profit drops to ₦980,000, lowering his tax bill.

Formal Workers For Formal Workers (Employees on PAYE)

• Employer -paid health or life insurance is tax-free. That means you enjoy cover without extra PAYE tax.
• Example: A bank staff’s HMO and group life premiums are paid by the employer. She doesn’t pay additional PAYE tax on those benefits.

SMEs and Registered Companies

• Group life, HMO, and property insurance premiums are tax-deductible, reducing company tax.
• Insured SMEs get better credit ratings , which makes loans cheaper and easier to access.

7 Steps For Informal Workers To Get Insured

1. Consider what financial setbacks you’re most vulnerable to (e.g., illness, theft, death).
2. Select from health, life, fire, accident, or microinsurance.
3. Look for NAICOM-licensed insurers with good reviews.
4. Match your budget with available plans. .
5. Ask questions. Know what’s covered, exclusions, and how to file a claim.
6. Register via agent, mobile platform, or cooperative group
7. Renew and stay consistent. 

New Solutions Making Insurance Easier

• Digital Microinsurance: USSD and mobile apps make sign-up as easy as buying airtime. (Reliance HMO, Curacel, Turaco).
• Cooperative Plans: Market unions, thrift collectors,  savings groups get bulk discounts on insurance. 
• Bundled Products: Microfinance loans now come with built-in insurance.
• Flexible Payments: Daily or weekly contributions suit irregular earners.

Final Word

Nigeria’s informal sector drives the economy but carries the most risk. 

👉 For Amaka, insurance  meant reopening her shop.
👉 For Isa, insurance meant surviving surgery.

With as little as ₦500 a month, you too can buy peace of mind. Don’t wait for disaster to ask, “Where do I start from?”Start today—with insurance.

Are You an Artisan or Small Business Owner?

Let us know in the comments which type of insurance you think would benefit you most. Need help choosing the right plan? We’ve got you covered—reach out today.