‘Informal sector contributes $10tr to global economy’
The contribution of the informal sector to global economy has been estimated at $10 trillion, an indication of how important the sector is to growth and development, analysts and researchers have said.
Rising from a webinar organised on the need to support grassroots economy to achieve desired growth, Professor and Senior Fellow in the Operations, Information Systems, and Marketing Division of the Lagos Business School, Yinka David-West, highlighted that the National Bureau of Statistics Poverty and Inequality Report, put poverty numbers at 40.1 per cent of Nigeria’s population, most of who are within the informal sector.
This, she said, has led to implementation of several social intervention programs to support the local populace.
One of such programmes is the increased conditional cash transfer (CCT) scheme, a social investment programme coordinated by the Bank of Industry (BoI).
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BoI Executive Director of Micro Enterprises, Toyin Adeniji, gave a background to why the CCT is important and how it has fared.
She explained that for the about 41 million Micro Small and Medium Enterprises in Nigeria, many of who operate with a small capital base, but remain a significant contributor to the economy, the coronavirus pandemic has adversely affected their operations.
She explained that the BoI, data collected over the three- year period of running the various schemes like TraderMoni, FarmerMoni & MarketMoni, has made it possible to study the informality in the various regions of the country and helped to structure a strong response to tackle eroding capital at this time.
She said reduction in oil prices along with the pandemic has affected how much support governments can provide at this time given reduced allocations.
Also, Adviser to the Ekiti State Government on Investment, Trade, and Innovation, Akin Oyebode, said the key challenges the relationship between the state government and the informal sector need to surmount are those of rural and suburban connectivity using technology and the supply chain issue of depending more on external demand, which the interstate restrictions have exposed as possibly disastrous if not well managed.
Other speakers are Thelma Ekiyor and Nkem Okocha-run private sector initiatives – SME.NG and Mamamoni – both of which support women with funding and vocational skills.
“As impact investment platforms, the pandemic has necessitated a slight change in how they provide support to their target audience who are mostly women building small businesses. Thelma’s team conducted surveys at the beginning of the pandemic which caused them to switch their approach to include stimulus packages that can keep these women’s businesses in survival mode at the very least. In her words, businesses in this space should be seen as being in the employment sector, not the informal sector, given the number of jobs they create even for people with no degrees,” they said.
On how their business runs, Ekiyor and Okocha, said: “Mamamoni’s approach has been slightly different in the sense that they have suspended the micro-loans they offer to their women beneficiaries for the period of one-year, as repayments have become an issue, even for previous non-defaulters.‘’
In a report, the participants at the webinar noted that over the last 15 years, Robert Neuwirth, a well-known researcher on underground economy studied what he calls ‘System D’, through many visits to cities across Africa and the rest of the world.
From a visit to Oshodi Market in Lagos, to a chat with a cooperative society in rural Kenya, Neuwirth’s studies have focused on the contribution of the informal sector to the economies of various countries and how it sustains livelihoods in each of the places he has been to, without looking fancy or having well-written business plans.
Another researcher, Niti Bhan has taken an interest in the informal markets in Africa, studying the business strategies of craftsmen, small shop owners, their middlemen, and other people whose contributions keep the continent’s economy afloat. Through her work, she has been able to suggest ways in which the value of these excellent small businesses can better be harnessed, as the current state of things she says, rids the sector of 40 to 60 per cent of profits.