Regulating Nigeria’s Informal Market

Over the years, Nigeria’s population has grown and so has its economy. Despite the growth of the nation’s economy, formal job opportunities have remained scarce, causing the informal sector/grey market to grow in size. The informal sector is an unregulated and untaxed market majorly made up of small-scale businesses. The informal sector constitutes many of Nigeria’s employed citizens. Many Nigerians are traders, street vendors and handymen; the downside is that they are untaxable and untraceable. Several factors are responsible for the increase in the informal sector – Illiteracy, unemployability, and lack of effective regulation. According to the International Monetary Fund (IMF), the informal sector accounted for about 57.7% of Nigeria’s gross domestic product (GDP) in 2022. The ability of the informal sector to contribute such a large percentage shows how much economic gain Nigeria could be missing out on due to its failure to regularise the sector.

It is vital that development policies and implementation match the growing speed of a nation’s population. According to the United Nations Population Fund, Nigeria’s inhabitants stand at 229.2 million. In a situation where a country fails to match development speed with its steadily increasing occupants, the result is not enough formally regulated jobs and an abysmal informal sector. This sector is critical to Nigeria’s growth and the sustenance of the populace. Many families and their wards depend on proceeds acquired from informal employment. The National Bureau of Statistics, in their Nigeria Labour Force Survey for Q4 2022, stated that the rate of informally employed Nigerians among the employed population was 93.5%. Despite the good this does for Nigeria’s economy, the downside is that many jobs in the informal market are low productivity, meaning that they do not play a significant role in the overall development of the nation’s economy, only sustain it.

In a country like Nigeria, where even the formal markets suffer poor amenities, informal markets can become an exhausting cycle, never really growing nor gaining more to do anything other than survive. In formalising the informal sector, it is essential to use tax incentives. Rigid tax policies discourage informal employees from registering their businesses in the formal sector. Ensuring that microfinance banks are available for flexible loan options is also essential. However, judging from Nigeria’s past attempts to regularise the informal market, these steps can only take us so far. Fundamental strides are required to transform the Nigerian informal sector tangibly. The government must invest in the educational sector to build a more literate population. Government, investors and relevant stakeholders must also look towards expanding formal markets to create more job opportunities for Nigerians as well. The journey to maximising the informal market and balancing it out against its formal counterpart is long, but this can be achieved with the consistent implementation of thorough economic policies that target the formal integration of the informal market.