Walk through any Nigerian city before eight o’clock in the morning, the woman frying akara has already served her first customers; the bus conductor is calling passengers; a carpenter is fitting doors at a construction site; a farmer is unloading yams at the market and a roadside mechanic is opening his workshop for the day’s business.
None of them clocks in at a registered company. Most do not contribute to a pension. Many have never applied for a bank loan. But together, they keep the country running. This is the economy Nigeria actually lives in.
According to the National Bureau of Statistics, 92.93 percent of employed Nigerians worked in the informal economy in 2023, a picture reinforced by subsequent analyses from the Nigerian Economic Summit Group. That figure should fundamentally shape how public policy is designed. Instead, much of Nigeria’s economic thinking continues to revolve around the formal sector, which employs fewer than one in ten workers.
This disconnect explains why many well-intentioned reforms produce uneven outcomes. Fuel subsidy removal, exchange-rate liberalisation, higher interest rates and tax reforms are often debated through the lens of formal businesses, financial markets and government revenue. Indeed, their effects are first felt in places where most Nigerians actually earn a living: markets, workshops, farms and roadside enterprises.
The problem is not that Nigeria has a large informal economy. Many developing countries do. The problem is that the country’s institutions continue to govern an economy that exists more in official records than in everyday life.
Consider how many public systems assume formality as the starting point. Credit requires documented income or titled assets. Pension schemes assume regular payroll deductions. Insurance products target salaried workers. Tax administration focuses on registered businesses. Labour protections are built around formal employment contracts. Each policy may be logical on its own. Together, they leave the overwhelming majority of working Nigerians outside the institutional structure meant to support economic life.
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This is why calls for formalisation have achieved only limited success. For years, small businesses have been encouraged to register, pay taxes and join the formal economy. The logic is understandable, but the sequence is often backwards. Formalisation cannot simply be demanded; it must become worthwhile. People are more likely to enter formal systems when those systems reduce risk, expand opportunity and improve livelihoods.
A trader who registers a business but still lacks reliable electricity, affordable credit or predictable regulation gains little from compliance. A farmer whose land has been cultivated for generations but lacks formal title remains locked out of finance despite possessing productive assets. An artisan who pays multiple informal levies while receiving few public services has little reason to believe that another registration will transform the way the government treats him.
The question, therefore, is not how to compel more Nigerians to become formal. It is how to build institutions that recognise the economic realities under which most Nigerians already operate.
Digital technology offers an important opportunity. Millions of traders, transport operators and small businesses now generate transaction histories through mobile money and electronic payments. Cooperative societies, market associations and trade unions also contain valuable records of economic activity and trust. These forms of economic identity may not resemble traditional collateral, but they reveal patterns of enterprise that institutions can no longer afford to ignore.
The same principle should guide broader economic policy. Financial inclusion should reflect how people earn, save and borrow rather than how policymakers assume they do. Social protection should reach daily earners whose incomes disappear the moment they stop working. Skills certification should recognise apprenticeships that have trained generations of artisans outside formal education. Public institutions should adapt to economic reality instead of expecting economic reality to conform to outdated institutional assumptions.
This is not an argument against formalisation. On the contrary, stronger formal institutions remain essential for productivity, investment and long-term growth. But successful formalisation is built on trust, not compulsion. Citizens enter formal systems when those systems become useful enough to justify participation.
Nigeria’s economic challenge has never been a shortage of enterprise. Every morning, millions of Nigerians demonstrate extraordinary resilience, creativity and determination in circumstances that would overwhelm many formal businesses. The greater challenge is that the institutions surrounding them have struggled to evolve at the same pace.
Tomorrow morning, the akara seller will light her stove before sunrise. The farmer will return to the market. The carpenter will report to another building site. Long before government offices open, they will already be creating value, generating income and sustaining communities.
Public policy should begin with that reality. Nigeria cannot build an inclusive economy while governing one that exists largely on paper. The country’s greatest economic opportunity lies not in discovering a new workforce, but in finally designing institutions that recognise the one it already has.
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