By Ambassador Abdullahi Aliyu Jibiya, Abuja.
THE INFORMAL ECONOMY
The “informal economy” are the small workplaces, that are rife with unhealthy working conditions, unregulated, low levels of skills and productivity, low or irregular incomes, long working hours, and a lack of access to information, markets, financing and training.
Millions of Nigerians live, work, and trade in the informal sector and also employ the most vulnerable residents. In terms of employment and output, the informal sector in Nigeria is larger than the formal sector in terms of employment and job creation. It is cash driven.
On the other hand, the informal economy has supported unlawful and criminal activities such as kidnapping and robberies, online scams, black markets, smuggling and money laundering. But all these cannot wipe out the crucial economic possibilities for the poor and disadvantaged.
The informal economy employs over 80 percent Nigerians. Given the labour intensity, there is little doubt that the bulk of businesses and entrepreneurs are in the informal sector. Unlike the formal economy, the informal economy’s operations are not included in Nigeria’s Gross Domestic Product (GDP). As a result, the GDP figure computation is a significant underestimate of the country’s GDP when the massive informal economy is excluded. Meanwhile, the country’s informal sector continues to flourish in various situations and, based on demographic and economic data, may be the biggest in Africa. Agreeably, across the country, it is easy to notice street traders, artisans, vendors, nano and micro-businesses, commercial buses, tricycles, and motorbikes (Okada riders), domestic workers, market traders, among others, all operating informally. Broadly speaking, you can easily see informality all around the country.
The informal economy has grown dramatically over the last two decades, with the root causes including elements related to the country’s economic context; decreasing levels of market regulation; weak policy frameworks; and socio-demographic drivers such as population growth, urbanisation, rising unemployment, widening inequality between rich and poor; and low-level education, including poverty. The major driver of the informal economy, on the other hand, is that such enterprises do not need to register with any relevant government authorities.
When citizens cannot find job in wage employment, the requirement for sustenance forces them to look for labour elsewhere. The alternative is mainly in the informal sector, where there is no minimum wage and workers are unlikely to pay taxes, have no holiday or labour rights, and frequently work in unsafe conditions. Most of the time, it is difficult for them to obtain microcredit since they lack economic stability and concrete employer-employee ties.
The informal economy provides a footing for survival for the most vulnerable and frequently ignored Nigerians. The majority of the elite view the enlarged and vast informal economy to be at the bottom rung of the economic system, whereas in fact, they are the key drivers of the economic system because they are too large, significant, and relevant to be ignored. For example, it is unclear whether the country has reliable data on the National Union of Road Transport Workers (NURTW) activities and their motor parks nationwide as well as the millions of people who derive sustenance in the parks; or the volume of transactions in auto spare parts, fruits and auto mechanics markets.
Take Katsina State as another example. Jibiya and Maiadua markets drive demand in Kano’s Dawanau Grain market with the large international customer based of the border towns. Their economies depend on the exchange of hard currencies, carried out informally, due to the absence of functional banks, whose defective analyses of the Nigerian market have prevented them from taking advantage of the reservoir of the exchange rate of CFA to the Naira. Illela market in Sokoto, Kamba in Kebbi, Maigatari in Jigawa and Damaturu market in Yobe State all fall into to the same category.
The failure of governance and inability to harness fiscal sources may have been responsible for the FGN and CBN’s liquidity problems. Squeezing the life out of the informal economy will definitely not be a solution. Clearly, there is a need for the government to embark on a series of measures, interventions, and support, to encourage the formalization of these businesses to sustain economic growth and development. As mentioned earlier, the informal sector is too large and important to be ignored. A concerted effort to identify and protect them is crucial for sustainability and economic development because huge potential tax revenue is lost yearly to this informality. Even President Ibrahim Babangida had to modify his Structural Adjustment Programme to accommodate the informal economy.
Part of the resilience of all Governments in Nigeria so far has derived from the viability of the informal economy, which has sustained food on the table of majority of Nigerians even when the economic policies of IMF and World Bank fail. Take out the informal economy and the Security Services cannot cope with the fallout. Is the President’s economic team part of this “currency swap” programme? I doubt it. Is the programme well thought out? I doubt it. Will it succeed? I doubt it. Will it jeopardize the popularity of President Buhari? Possible. Will it affect the chances of APC in the next election? Possible. Will it be reversed by the next Government? Possible. Is it advisable then? Definitely not.