Knowing is half the battle


When it comes to Nigeria’s vast informal sector, Nigerian public officials can be astonishingly candid. The executive director of the Nigerian Export Promotion Council (NEPC), David Adelugba, said at a recent press conference that most of the Nigerian products sold outside the country are not officially exported out of the country.

“Most of the trade done in the export sector are done through the informal means and this affects the level of development in the sector because the government does not have a record to know how the sector is thriving and how much it can contribute to the nation’s development,” Mr. Adelugba said. (“The numbers don’t add up,”, October 21, 2009)

With so much unregistered commerce taking place, policymakers cannot possibly ascertain the most pressing issues for the private sector. According to Abubakar Muhammad, the permanent secretary, Ministry of Commerce and Industry:

“The lack of reliable and consistent data is one of the greatest challenges facing producers and users of industrial and business statistics in Nigeria.” (Ibid.)

One pressing issue for which there is some reasonable data, are incentives that cultivate large informal sectors. The World Bank’s Doing Business 2010 report indicates that starting a business in Nigeria requires eight procedures, 31 days, and fees adding up to more than six times national income per capita.

In addition to registration costs, there’s also costs of operation that drive informal sector activity. If government operations aren’t very transparent and responsive, they’re a disincentive for businesses to interact with government as formal entities. The Global Integrity Indicators Scorecard for Nigeria provides key insights into institutional factors affecting private sector operations, especially in terms of judiciary accountability and rule of law.

Nigerians’ frustration with the formal sector is so deep, that they don’t even trust it with their savings. Samuel Nzekwe, immediate past president of the Association of National Accountants of Nigeria, told in September that the informal sector holds more than 50 percent of Nigerian currency.

Knowing is half the battle. While it’s refreshing that select Nigerian public officials show an awareness of their country’s vast informal sector, it also begs the question: what might they do to build a bridge from informal to formal?