ILPC 2026

Globally, the nature and conditions of works are changing due to a growing size of, and diverse activities undertaken in, the informal economy (Becker, 2004; De Soto, 2011; Igudia et al., 2015). The informal economy employs about two-thirds of the total global workforce and will plausibly dominate future global employments (Neuwirth, 2011). Yet, participants in the sector encounter political and economic challenges, which reduce their productivity. This is hardly surprising considering different theorising of the informal economy: Dualist or Modernist, Structuralists, Legalist or Neo-liberals, and Voluntarist or Post-structuralist theories. These theories represent either of, or fall in-between, two clear extreme views: the informal economy is negative, shows economic backwardness, underdevelopment, it is parasitical and must be discouraged; and the positive view of the informal economy as a seedbed for entrepreneurship, employer of a large number of individuals, contributor to GDP growth and income generation. The latter argues that the positive attributes/potentials of the informal economy should be harnessed. Unsurprisingly, the various theories have influenced policy approaches to the informal economy, ranging from deterrence, total negligence, to theoretical supports, which, often, are not backed by political will.

In this paper we employ data collected from 569 respondents and the multiple indicators, multiple causes modelling technique to investigate the nature of work, prospect and challenges of working in the Nigerian informal economy. Results from our study show that participants in the Nigerian informal economy are largely self-employed/small enterprises, both as main (46.8%) and second (51.4%) employment, largely married (74.2%), male (68.7%), and aged between 26 and 50 years (70.72%). Trade is the most popular activity undertaken in the Nigerian informal economy, both as main (31%) and second (30.1%) job/business activity. This is followed by garage or kiosk type of employment for the main, and consulting or out-of-office-hours professional practice for a second, job. Additionally, results show that the informal economy makes positive contributions to the Nigerian economy; it creates jobs, income and reduces poverty for participants. It also facilitates growth and the distribution system in Nigeria through its linkage with the formal economy.  

However, the Nigerian informal economy is faced with several challenges which limit its ability to fully achieve its potentials. Inadequate finance/access to credit facility, too much levies/multiple taxes, bureaucracy/overregulation, inadequate training/lack of government support, harassment/extortions/corruption, and costly utilities/inadequate infrastructures were found to hinder productivity in the Nigerian informal economy. Considering these challenges, and the contributions of the sector to the Nigerian economy, we recommend that policy makers should: facilitate job provision and entrepreneurial development by creating an environment conducive for private sector to flourish; deal with corruption through public sector reforms, privatisation of public enterprises in a competitive market, healthy competitions; facilitate finance and training/education for budding entrepreneurs by providing support and guarantees to banks willing to take the risk of lending to participants in the informal economy, in the short run, and encouraging competition in the long run; For training/education of participants, apprenticeship system should be in place.