The growing adoption of digitalisation will not be the death of the informal market, according to Uchenna Uzo, a professor at the Lagos Business School (LBS)
The informal market which describes the part of any economy that is neither taxed nor monitored by any form of government is estimated to be 57.7 percent which represents approximately $1.167 billion at GDP levels in Nigeria.
Because of its huge size, it is constantly a source of strategic permutations that are aimed at reducing the number and pushing more businesses to the formal sector. Often the technology-driven strategies are projected to disrupt and even eliminate the private sector.
But Professor Uzo who spoke during his inaugural lecture said these projections are based on the false premise of what constitutes the informal market. He identified three popular fallacies that often obstruct the understanding of the market.
The three fallacies include that markets in Africa’s informal sector are illegal ones or black markets that concentrate n flouting the laws of the land.
“My research into Nollywood and other businesses has shown that the term informal is not the same as illegal. I discovered that companies that operated in unregulated markets frequently exhibit several informality-related traits,” Uzo noted. “We define informality as economic activities that develop from socially agree and mostly unwritten regulations that primarily occur outside official institutions.”
The second myth is that Africa’s informal marketplaces will completely or eventually transition to modern markets in the formal economy. Uzo argued that companies in the formal sector often resort to informal practices when the rules are unclear, and they do so as an independent organising framework rather than as a way to violate the rules unfairly. Also, many businesses in Africa constantly combine formal and informal practices.
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“Both dominant and hybrid copyright structures were found in our Nollywood study. Dominant configuration, which goes beyond the state-approved Copyright Act describes a company’s adoption of copyright policies solely based on unwritten traditions of ethnic or religious communities,” Uzo said.
The last myth is the notion that the informal sector does not have structure. Uzo said, from his research, while the informal market may look unstructured, they do employ a sophisticated and distinctive business method.
“My co-authors and I compiled several pieces of research that spanned more than ten years and found the organising principles, contractual procedures, and price-setting agreements that define the fundamental components of the informal marketplaces in Africa,” he noted.
According to him, businesses should rather be strategising on how to sell in the informal market rather than building their future around myths. There are five methods to take into account to succeed in the informal market. These include establishing a structure in the market; gaining the market’s trust; maintaining a sharp cultural and political awareness; creating a team and nurturing talent; and education before going to court.
The inaugural lecture culminated in a dinner organised by Terragon Group at Capital Club Lagos for the professor. Peter Bankole, chief operating officer at Pan-Atlantic University, said at the dinner that the ideas shared at the inaugural lecture were thought-provoking and transformative for the marketing industry.
The dinner was attended by Juan Elegido, vice-Chancellor of Pan-Atlantic University and a Professor of Business Ethics at the Lagos Business School; Chris Ogbechie, professor of Strategic Management and the Dean at Lagos Business School, Pan-Atlantic University, Elo Umeh, CEO of Terragon Group, among many others.
