Informal Economy Survey

The informal economy (also known as the informal sector) is a major part of the Nigerian economy, and provides goods and services to millions of Nigerians. In addition, it is a major provider of employment, especially for those who are unable to secure work in the formal sector. Despite the importance of the informal sector, it is often overlooked and misunderstood. The informal economy comprises commercial activities that are not fully regulated by the government and other public authorities; however, these activities are legal, albeit conducted in an irregular manner.
In order to gain a better understanding of activities within the informal economy, as well as gauge the public perception of its relevance and overall impact, an online survey was carried out in September 2014. A total of 1,177 responses were obtained and analysed.
The major findings of the survey are as follows:

Impact
The majority of respondents (56%) indicated that the informal sector has an effect on their organisation, with many specifying that this effect is positive. The sector’s impact varies from one industry to the other e.g. survey respondents indicated that the Agriculture industry (73%) benefits more from informal sector activities than the ICT sector (48%). Most organisations are aware of the activities of informal establishments, and even make use of their products and services (52%); only a few respondents (5%) expressed that they have no affiliations with the informal sector. Many (23%) believe that their organisations patronise providers of retail, food (e.g. catering) and utilities (e.g. electricity and water) services the most. Individuals however, are more likely to patronise food (48%), fashion (46%) and transport (34%) service providers in the informal sector.

Public Perception
Most respondents (80%) believe that the informal economy is quite established in Nigeria, due to the country’s high rate of unemployment. As a result, 73% of respondents approve of the informal economy due to its role in helping to solve this problem. 63% of respondents that do not approve of the sector believe that all enterprises should contribute to the growth of the economy by paying tax, something that many workers in the informal sector fail to do. Those that approve of the sector believe that policies should be created to make the formalisation process as straightforward and inexpensive as possible (61%), in order to encourage/support those operating in the informal economy. Those that do not approve think that technology should be used to monitor activities in the sector, so as to detect and discourage informal activity (53%). Based on current trends, 66% of respondents foresee significant growth in the informal sector over the next decade.

Major Drivers
The major economic drivers of the informal sector have been identified as an increase in capital investment into the country (66%), globalisation (64%), industrialisation (62%) and increasing market/price competition (62%). Socio-demographic drivers are population growth (78%), urbanisation (69%), rise in unemployment (63%) and the growth of the middle class (60%). Societal and governance drivers include a growth in socially-focused businesses (61%) and decreasing levels of market regulation (52%) respectively.

Prevalence
Most respondents (79%) do not currently work in the informal sector. Those who do work in the sector are either self-employed (44%) or are in paid employment (56%). Workers in the sector are also more likely to be male than female; of our respondents who have worked in the sector, 78% are men and 22% are women. Expectedly, employment in the sector is influenced by the level of educational qualifications attained; the more educated the respondents were, the less the likelihood that they would be employed in the informal sector. Most National Diploma (ND) holders (63%) have been employed in the informal economy, compared to just 39% of Master’s degree holders. The majority of workers in the informal sector (63%) are employed on a full-time basis. Most (66%) earn less than N100,000 per month, and only half (50%) are satisfied with their employment status. This survey reveals that 61% work in the sector because they were unable to secure formal sector employment. The highest number of informal economy workers (23%) provides financial services to others.