Increasing unemployment rates, large population numbers and the high prevalence of poverty in the country has been identified as the key factors ensuring the continuous growth of the informal sector.
Overwhelming 80 percent of Nigerians believe that the informal economy is quite established in Nigeria, as a result of the country’s high rate of unemployment, according to a recent report by Phillips consulting.
The survey was conducted in order to gain a better understanding of activities within the informal economy, as well as gauge the public perception of its relevance and overall impact
According to the National Bureau of Statistics (NBS) also states that the sector consists of over 17 million businesses and enterprises, and contributes significantly to job creation. It was estimated that between July 2012 and June 2014, 2.48 million jobs were created, with the informal economy contributing the most at 1.41 million (57 percent), the formal economy contributing 40 percent, and the public sector contributing 3 percent.
“It is more relevant than ever to our country’s economy, and grows mainly as a result of increasing poverty and unemployment levels,” the report said.
A majority of the survey respondents (56 percent) also indicated that the informal sector had a significant effect on their organisation, with many specifying that this effect was positive.
The survey also stated that the Agricultural sector benefited more from informal sector activities that any other sector.
According to the report, the major economic drivers of the informal sector are increase in capital investment into the country (66 percent), globalisation (64 percent), industrialisation (62 percent) and increasing market/price competition (62 percent).
“Activities in the informal economy are often carried out using cash-based transactions. Electronic forms of payment, through bank transfers mobile payment platforms and the use of cheques are not common and as such, records of informal transactions are often not available,” said the report.
“As a result, the income earned by the informal sector worker would not be reported for taxation,” the report adds.
The informal economy in Nigeria is estimated to account for 57.9 percent of Nigeria’s rebased GDP (N50.8 trillion), according to the United Nations Development Programme (UNDP).
The informal sector remains a major part of the Nigerian economy as it remains a major provider of employment, especially for those who are unable to secure work in the formal sector.
The informal economy has being globally accepted as a crucial generator of income, goods and services and employment especially for low-income earners.
The global informal economy is estimated to be worth $10 trillion and accounts for about 80 percent of the global workforce.
Countries such as Bolivia (66 percent), Zimbabwe (62 percent), Tanzania (57 percent), Nigeria (56 percent) and Thailand (51 percent) were among the countries whose informal activities contributed more to the overall economy than the activities of the formal sector.
“The informal sector has helped to mitigate the high unemployment problem in the country,” said the report.
Many Nigerians that work in the informal sector do so as a result of an inability to obtain employment in the formal sector.
JOSEPHINE OKOJIE
