Feature/OPED
Nigeria: Strengthening Artisans, Kiosk, Micro and Nano Businesses in the Informal Economy
By Timi Olubiyi, PhD
The expression “informal economy” encompasses a huge diversity of situations and phenomena in the country.
However, working in the informal economy is often characterised by small or undefined workplaces, unsafe and unhealthy working conditions, unregulated, low levels of skills and productivity, low or irregular incomes, long working hours, and lack of access to information, markets, finance, training, and technology.
The activities that occur outside the legal framework are considered informal. The informal economy can be seen either as the nature of the enterprise operation or the nature of the employment relationship that exists in the business.
That said, millions of Nigerians especially those that reside in the economic hub of the country, Lagos State –live, work, trade and produce in this informal economy and also engage the vulnerable citizens.
From context observation, the informal sector in Nigeria is bigger than the formal sector in terms of employment and output year on year. In some cases, the informal economy is referred to as a shadow economy if associated with illegality and illicit activities such as internet scams, black markets, crime, production, and smuggling of illegal drugs, and money laundering, or as the case may be.
For the informal economy, one thing is sure, informality provides critical economic opportunities for the poor and the vulnerable.
In Lagos State alone, the informal economy is said to employ about 5.5 million people – about three-quarters of the state’s 7.5 million labour force recently, and in the country as a whole with nearly 200 million people, over 80 per cent of the population work in the informal sector according to the International Monetary Fund (IMF).
There is no doubt that the majority of enterprises and entrepreneurs around are in this informal sector considering the labour intensity. Though, unlike the formal economy, activities in the informal economy are not included in the Gross Domestic Product (GDP) of the country.
Therefore, it can be said that the GDP number computation is a severe underestimation of the country’s GDP considering the exclusion of the large informal economy.
Meanwhile, the informal economy in the country continues to expand in many contexts and may even be the largest in Africa by estimation considering the population and economy.
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 witnessed a massive expansion in the last two decades in Nigeria and the root causes of these include elements relating to the economic context in the country, decreasing levels of market regulation, weak policy frameworks, and socio-demographic drivers such as population growth, urbanization, rise in unemployment, widening inequality between the rich and poor, low-level education, including poverty. The key driver of the informal economy, however, is that such businesses in the sector do not need registration with any relevant government agencies.
When workers cannot find opportunities in traditional wage employment, the need for subsistence demands they find work somewhere else. Most times the alternative is usually in the informal sector of the economy where there is no minimum wage and workers are unlikely to pay taxes, have no holiday rights or labour rights, and often work in dangerous conditions.
Most times, it is usually a struggle for them to access microcredit, they lack income security and stable employer-employee relationships. In the midst of all these, it only offers the most vulnerable and often uneducated Nigerians a foothold for survival. This expanded and large informal economy is perceived by the majority of the elite to be at the bottom rung of the economic system when in truth, they are the major driver of the economic system because they are too large, important, and relevant to be ignored.
For instance, it is unclear if the country has reliable data on the National Union of Road Transport Workers (NURTW) activities in the country or the volume of transactions in Ladipo auto spare part market in Oshodi Lagos State and the popular computer village in Ikeja Lagos State, Balogun Market, and Alaba International Market to mention a few. These are visible informal business locations set-up within the country with multi-million daily business turnover, yet the operators are unrecognized or uncaptured by policymakers or relevant authorities.
This part of the economy is particularly large in Nigeria, with the IMF estimating it to constitute about 60 per cent of the entire Nigerian economy, yet not subject to full government regulations.
Meanwhile, working in the sector is attractive due to the ease attached to operations as a result of the absence of a bureaucratic regulatory framework, and little or no formal educational requirements.
There are multiple perspectives on the informal economy, some associate it with lost revenue, unfair competition, low productivity, human rights abuses, and environmental degradation; while others associate it with entrepreneurship, flexibility, and resilience.
Overall, the informal economy is enduring; but suitable regulations and policies are required to improve the sector and introduce formalization. The decision for these businesses to formalize depends on the benefits that are derived from formalization over the risks of remaining in the informal economy. If the former outweighs the latter, only then does formalization seem like a viable option to the operators.
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, this informal sector is too large and important to be ignored, concerted effort to identify and protect them is crucial for sustainability and economic development.
In recent times, the novel Coronavirus (COVID-19) pandemic has negatively impacted these informal businesses greatly. Because they rely on daily income and most of them can rarely “work from home”, so the harsh reality is that most of these businesses need government support. Therefore that presents a good avenue for the government to have a mass registration and identification and equally reach out to them through social interventions and palliative.
Besides, the IMF is urging national statistical agencies to gather information on the informal economy to help in policy formulations and for gathering reliable data for economic planning. In this context, careful attention must be paid to the informal economy and policy solutions need to be in place to encourage and induce their formalization. These suggestions, if efficiently considered might, in turn, reduce the size of the informal economy in the country. Good luck!
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Dr Timi Olubiyi is an Entrepreneurship & Business Management expert with a PhD in Business Administration from Babcock University Nigeria. He is a prolific investment coach, seasoned scholar, Chartered Member of the Chartered Institute for Securities & Investment (CISI), and Securities & Exchange Commission (SEC) registered capital market operator. He can be reached on the Twitter handle @drtimiolubiyi and via email: [email protected], for any questions, reactions, and comments.
By Luke Kyohere
The global payments landscape is undergoing a rapid transformation. New technologies coupled with the rising demand for seamless, secure, and efficient transactions has spurred on an exciting new era of innovation and growth. With 2025 fast approaching, here are important trends that will shape the future of payments:
1. The rise of real-time payments
Until recently, real-time payments have been used in Africa for cross-border mobile money payments, but less so for traditional payments. We are seeing companies like Mastercard investing in this area, as well as central banks in Africa putting focus on this.
2. Cashless payments will increase
In 2025, we will see the continued acceleration of cashless payments across Africa. B2B payments in particular will also increase. Digital payments began between individuals but are now becoming commonplace for larger corporate transactions.
3. Digital currency will hit mainstream
In the cryptocurrency space, we will see an increase in the use of stablecoins like United States Digital Currency (USDC) and Tether (USDT) which are linked to US dollars. These will come to replace traditional cryptocurrencies as their price point is more stable. This year, many countries will begin preparing for Central Bank Digital Currencies (CBDCs), government-backed digital currencies which use blockchain.
The increased uptake of digital currencies reflects the maturity of distributed ledger technology and improved API availability.
4. Increased government oversight
As adoption of digital currencies will increase, governments will also put more focus into monitoring these flows. In particular, this will centre on companies and banks rather than individuals. The goal of this will be to control and occasionally curb runaway foreign exchange (FX) rates.
5. Business leaders buy into AI technology
In 2025, we will see many business leaders buying into AI through respected providers relying on well-researched platforms and huge data sets. Most companies don’t have the budget to invest in their own research and development in AI, so many are now opting to ‘buy’ into the technology rather than ‘build’ it themselves. Moreover, many businesses are concerned about the risks associated with data ownership and accuracy so buying software is another way to avoid this risk.
6. Continued AI Adoption in Payments
In payments, the proliferation of AI will continue to improve user experience and increase security. To detect fraud, AI is used to track patterns and payment flows in real-time. If unusual activity is detected, the technology can be used to flag or even block payments which may be fraudulent.
When it comes to user experience, we will also see AI being used to improve the interface design of payment platforms. The technology will also increasingly be used for translation for international payment platforms.
7. Rise of Super Apps
To get more from their platforms, mobile network operators are building comprehensive service platforms, integrating multiple payment experiences into a single app. This reflects the shift of many users moving from text-based services to mobile apps. Rather than offering a single service, super apps are packing many other services into a single app. For example, apps which may have previously been used primarily for lending, now have options for saving and paying bills.
8. Business strategy shift
Recent major technological changes will force business leaders to focus on much shorter prediction and reaction cycles. Because the rate of change has been unprecedented in the past year, this will force decision-makers to adapt quickly, be decisive and nimble.
As the payments space evolves, businesses, banks, and governments must continually embrace innovation, collaboration, and prioritise customer needs. These efforts build a more inclusive, secure, and efficient payment system that supports local to global economic growth – enabling true financial inclusion across borders.
Luke Kyohere is the Group Chief Product and Innovation Officer at Onafriq
In a heartfelt statement released today, the Conference of Nigeria Political Parties (CNPP) has extended its warmest congratulations to Ghana’s President-Elect, emphasizing the importance of learning from Ghana’s recent electoral success as Nigeria gears up for its 2027 general elections.
In a statement signed by its Deputy National Publicity Secretary, Comrade James Ezema, the CNPP highlighted the need for Nigeria to reclaim its status as a leader in democratic governance in Africa.
“The recent victory of Ghana’s President-Elect is a testament to the maturity and resilience of Ghana’s democracy,” the CNPP stated. “As we celebrate this achievement, we must reflect on the lessons that Nigeria can learn from our West African neighbour.”
The CNPP’s message underscored the significance of free, fair, and credible elections, a standard that Ghana has set and one that Nigeria has previously achieved under former President Goodluck Jonathan in 2015. “It is high time for Nigeria to reclaim its position as a beacon of democracy in Africa,” the CNPP asserted, calling for a renewed commitment to the electoral process.
Central to CNPP’s message is the insistence that “the will of the people must be supreme in Nigeria’s electoral processes.” The umbrella body of all registered political parties and political associations in Nigeria CNPP emphasized the necessity of an electoral system that genuinely reflects the wishes of the Nigerian populace. “We must strive to create an environment where elections are free from manipulation, violence, and intimidation,” the CNPP urged, calling on the Independent National Electoral Commission (INEC) to take decisive action to ensure the integrity of the electoral process.
The CNPP also expressed concern over premature declarations regarding the 2027 elections, stating, “It is disheartening to note that some individuals are already announcing that there is no vacancy in Aso Rock in 2027. This kind of statement not only undermines the democratic principles that our nation holds dear but also distracts from the pressing need for the current administration to earn the trust of the electorate.”
The CNPP viewed the upcoming elections as a pivotal moment for Nigeria. “The 2027 general elections present a unique opportunity for Nigeria to reclaim its position as a leader in democratic governance in Africa,” it remarked. The body called on all stakeholders — including the executive, legislature, judiciary, the Independent National Electoral Commission (INEC), and civil society organisations — to collaborate in ensuring that elections are transparent, credible, and reflective of the will of the Nigerian people.
As the most populous African country prepares for the 2027 elections, the CNPP urged all Nigerians to remain vigilant and committed to democratic principles. “We must work together to ensure that our elections are free from violence, intimidation, and manipulation,” the statement stated, reaffirming the CNPP’s commitment to promoting a peaceful and credible electoral process.
In conclusion, the CNPP congratulated the President-Elect of Ghana and the Ghanaian people on their remarkable achievements.
“We look forward to learning from their experience and working together to strengthen democracy in our region,” the CNPP concluded.
By Kenechukwu Aguolu
The proposed tax reform, involving four tax bills introduced by the Federal Government, has received significant criticism. Notably, it was rejected by the Governors’ Forum but was still forwarded to the National Assembly. Unlike the various bold economic decisions made by this government, concessions will likely need to be made on these tax reforms, which involve legislative amendments and therefore cannot be imposed by the executive. This article highlights the purposes of taxation, the qualities of a good tax system, and some of the implications of the proposed tax reforms.
One of the major purposes of taxation is to generate revenue for the government to finance its activities. A good tax system should raise sufficient revenue for the government to fund its operations, and support economic and infrastructural development. For any country to achieve meaningful progress, its tax-to-GDP ratio should be at least 15%. Currently, Nigeria’s tax-to-GDP ratio is less than 11%. The proposed tax reforms aim to increase this ratio to 18% within the next three years.
A good tax system should also promote income redistribution and equality by implementing progressive tax policies. In line with this, the proposed tax reforms favour low-income earners. For example, individuals earning less than one million naira annually are exempted from personal income tax. Additionally, essential goods and services such as food, accommodation, and transportation, which constitute a significant portion of household consumption for low- and middle-income groups, are to be exempted from VAT.
In addition to equality, a good tax system should ensure equity and fairness, a key area of contention surrounding the proposed reforms. If implemented, the amendments to the Value Added Tax could lead to a significant reduction in the federal allocation for some states; impairing their ability to finance government operations and development projects. The VAT amendments should be holistically revisited to promote fairness and national unity.
The establishment of a single agency to collect government taxes, the Nigeria Revenue Service, could reduce loopholes that have previously resulted in revenue losses, provided proper controls are put in place. It is logically easier to monitor revenue collection by one agency than by multiple agencies. However, this is not a magical solution. With automation, revenue collection can be seamless whether it is managed by one agency or several, as long as monitoring and accountability measures are implemented effectively.
The proposed tax reforms by the Federal Government are well-intentioned. However, all concerns raised by Nigerians should be looked into, and concessions should be made where necessary. Policies are more effective when they are adapted to suit the unique characteristics of a nation, rather than adopted wholesale. A good tax system should aim to raise sufficient revenue, ensure equitable income distribution, and promote equality, equity, and fairness.
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