For a lot of individuals, organisations and even governments, the question of what the future holds is a pertinent one – oftentimes fraught with apprehension while at other times, a calm assurance. But one thing is clear – we must never lose sight of the future because, in there lies the possibility that tomorrow robins will sing, bringing joy and colour to erase the tetchiness of today. In looking towards the future, you must prepare and plan for it and a key way to do that is by interrogating and asking questions.
Last month during the launch of the Moniepoint Informal Economy Report in Abuja, Special Adviser to the President on Economic Affairs, Dr Tope Fasua, first broached the subject as he delivered his goodwill remarks. In signposting his question, he pressed home the fact that Nigeria is home to about 11.7 per cent of the world’s nano, micro, small, and medium enterprises given that there are about 332 million of them globally and that with the demonstrable resilience that they have shown, we need to accord them more respect against the backdrop of their impressive and solid contributions in undergirding the nation’s economy.
What is it about the informal economy that has provoked a report that has received wide acceptance and is well-talked about and why the informal economy? It is that crucial, colourful, and commonly underestimated segment of our national life which some experts have termed invisible but yet very palpable; unseen yet its workings are abundantly manifest; underground yet overwhelmingly pervasive. The informal economy is renowned for providing employment, income generation, and social safety nets for the vast majority, contributing substantially, some say close to half of Nigeria’s GDP.
Need I say more? So we can all agree that the informal operators deserve every attention they can get to ensure that they continue to support and strengthen Nigeria’s economy. Recently, Moniepoint in conjunction with the Ministry of Industry, Trade, and Investment, and Small and Medium Enterprise Development Agency of Nigeria, released a data and insights-filled report, Nigeria’s Informal Economy Report 2024, providing an in-depth analysis of Nigeria’s informal economy and a critical resource guide for policymakers, investors, and others. Here are some key takeaways from the report that have resonated strongly with me and point us in the right direction of how we need to evolve as a nation.
Firstly, we must properly cultivate and harness the abundance of youthful zest in the country. According to the report, more than half of the informal economy population is under 34 years old, with the largest group (43 per cent) aged between 25 and 34. This youthful bulge presents a significant and huge opportunity for socio-economic transformation through innovation and entrepreneurship. Here we can also develop mentorship programmes which pair experienced entrepreneurs with these young business owners while we create youth-focused business incubators and accelerators tailored to informal sector needs. Imagine if we improved the competencies of these young folks while layering affordable financing plans on top of it, there’s no stopping us from there. There’s a closely aligned data point that the study reveals – unemployment is what has driven more than half of the business owners in the informal space to start their ventures. The takeaway is clear – we need to create more and equal opportunities for a lot of these young people to make the best out of their current lives, in this way safeguarding the future that we desire for our dear country.
Secondly, women must matter. We must be deliberate in fast-tracking female empowerment – girl child education; increasing women in science, technology and math initiatives; and women-dedicated soft loans and grants among other things. The report shows that women account for close to 40 per cent of participants in Nigeria’s informal economy and in spite of the equity challenges that they face where for example nine out of 10 female-owned businesses in the informal economy earn less than N250,000 monthly, they still remain strong conduits for economic empowerment across the country. If we are able to establish more women business networks and mentorship programmes and develop financial products specifically tailored for women-owned informal businesses, we’d have a good head start in deepening value creation for the nation’s economy. I’d like to be very clear – women are a key cog in accelerating the wheels of sustainable and inclusive economic growth.
Lastly, that informal businesses might live a lot longer is a task that must be done. So the report shows that a whopping 80 per cent of businesses in the informal sector have been operating for less than five years. That’s a grime mortality rate for businesses as this indicates the challenges of sustaining businesses long-term, with only 18.3 per cent surviving beyond five years. The question then is how do we develop campaigns and initiatives to help businesses transition from within the two-to-five-year stage to long-term sustainability? Another strategy could be to onboard a lot more business development services firms to offer workshops on business planning, growth strategies, and risk management for these informal businesses in a language and format that they can understand and would not disrupt their way of life.
I’d say that this report should serve as a wake-up call for all stakeholders, having highlighted the immense potential of Nigeria’s informal sector. By addressing the challenges and capitalising on the opportunities, the country can unlock a new era of economic growth and shared prosperity.
The future may be more informal. With trends like automation, climate change, and the gig economy, a deeper understanding of the informal economy in an age of machine learning, artificial intelligence, IoT and other emerging technology becomes imperative. Technology has made it easier than ever to operate informally through the gig economy, digital payments, and e-commerce.
I would close this piece with the words of Olufemi Awoyemi, Founder of Proshare, “If there is something we have learned over the years, it is that a business does not thrive or fail on the circumstances it faced; but on the character it chooses to adopt; the culture that drives missions, and the institutional resilience it builds to deliver the adaptability and agility required to weather storms.” From the Moniepoint Informal Economy Report, it is clear that these informal businesses have resilience and character; they need the right environment to bloom and grow.
