Support Nigeria’s informal sector to spur development

Aim at transparency, effectiveness and innovation while rendering support

The COVID-19 pandemic has brought negative economic consequences in the form of job losses, threatened the sustainability of firms and depressed growth in GDP. Nigeria has the challenge of a large informal sector that is most vulnerable to the effects of the pandemic. Nigeria’s informal sector is also the employer of the largest number of citizens. The federal government and other stakeholders must roll out measures to provide temporary support to the informal sector. Nigeria must design and roll out measures to support targeted groups and individuals in this sector.

It is a tall order. The context is that the informal sector is a significant contributor to the Nigerian economy, accounting for a substantial portion of employment and national GDP. According to the International Monetary Fund (IMF), the informal sector accounts for approximately 65 percent of economic activities in Nigeria. In sub-Saharan Africa, the informal sector contributes about 72 percent to employment, excluding agriculture. Including agriculture should put figures at around 90 percent.

According to the IMF, “Substantial and timely support is crucial. Policies could include cash transfers or in-kind support to vulnerable households, including informal workers.”

Nigeria seems to have initiated such steps upon the commencement of lockdown measure.  However, we have reasons to believe that the process was not transparent enough and lacked effectiveness, orderliness and innovation. It has been nothing short of bedlam.

Palliatives to the vulnerable seem to have ceased with the easing of the lockdown. We urge a reignition of these measures more transparently and effectively as this will go a long way to lessen the burdens of economic entities in the informal segment.

Failure to pay attention to the needs of the informal sector will worsen what is already a precarious economic situation for Nigeria grappling with high unemployment and poverty rates. The National Bureau of Statistics (NBS) put Nigeria’s unemployment rate at 23.1 percent. Also, half of Nigeria’s population currently live below the poverty line ($381.75) according to the NBS report in 2019.

The effect of the pandemic is not only limited to the informal sector. According to the Nigeria Employers’ Consultative Association (NECA), the umbrella organisation of employers in the Organised Private Sector, Nigerian employers are fighting to keep staff on their payrolls amid the financial pain inflicted by the COVID-19 pandemic.

Some organisations can only afford to pay 50 percent of staff salaries while some have halted recruitment processes, dashing the hopes of graduates and other job seekers.

The IMF in its recent report, COVID-19: An unprecedented threat to development, stated that a more supportive monetary stance and injection of liquidity could also play an essential role in sustaining firms and jobs by enabling demand. Financial sector supervision should aim to maintain the balance between preserving financial stability and sustaining economic activity.

The depth of the impact and the speed of recovery would depend mainly on what the authorities do. Central to this is support for the informal sector, given the size and significance of that sector.

Job losses pose an unimaginable threat to the security of the nation. We saw a snippet of such consequence when hoodlums called “one million boys” took to the streets disturbing the peace of neighbourhoods amid the lockdown imposed by the federal government. We must minimise job losses in the informal sector even as the big corporates contemplate a reduction in staff numbers.

The Nigerian federal government cannot afford to battle insecurity while trying to combat the pandemic effect on the economy and health fronts.

GDP measures economic activities. Households and firms in all forms drive these business activities. Showing concern in their survival will positively impact on economic growth and development.


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