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Declining income, high tax burdens hit informal

Franklin Alli
AFRICAN Institute for Applied Economics(aiae) has reported that declining income, and high tax burdens are hitting hard on the informal sector across the country, even as the sector has been contributing an estimated 68 per cent to Gross Domestic Product (GDP) per annum in the last five years.

The Institute has therefore called for policies aimed at easing the constraints being faced by operators in the sector and stimulate productivity.

The Executive Director aiae, Prof. Eric Eboh, who presented the research findings to journalists in Lagos, weekend, said that in a  survey of four thousand,  four hundred and fifty-five (4,455) informal sector enterprises in the economy, in eleven (11) states in the South-South and South-East zones of the country conducted by the Institute,   findings showed that declining income, high tax burden and high black market premiums are seriously affecting enterprises in the informal sector of the economy.

According to him, findings further revealed that other major constraints pummeling the sector are inadequate fund for expansion, low level of linkage with the formal and external sector, infrastructure, increasing cost of rents and multiple taxes, etc.

“Our findings reveal that since 1970, the size of the informal economy has hovered between 44-68 per cent of GDP.  In particular, our estimates show that informal sector was about two-thirds of GDP in 2005.  Whole sale and retail and personal services relatively dominate the informal sector while financial intermediation is the least in term of number of enterprises that are engaged in it.

The ICT influence in the sector has grown very rapidly in the last five years.  One prominent feature of informal sector in Nigeria is that enterprise ownership is dominated by youth between 20 and 39 who own about 60 per cent of all the enterprises and over 55 per cent of such enterprises operated by this age category are less than 5 years old,” he disclosed.

Findings further reveals that people without schooling dominate the informal labour market.  Most of the employees and apprentices have not attended any formal schooling.  Only about 5 per cent of the employees of the sector attended post-secondary educational institutions. Over 70 per cent of the enterprises owner perceive their business to have grown in any of the following forms: employing more labour, capital, revenue, new products and additional branches.

However, over 96 per cent of respondents complained that lack of fund is the single most important determinant of mortality among enterprises.

He explained that the survey was undertaken to measure trends in the sector such as income, employment and outputs including contributing to Gross Domestic Product (GDP).

“One of the major constraints to development policy making and economic management in the country is the paucity of credible statistics and systematic evidence on the informal sector.

While studies have been carried out on the informal sector, for example, the collaborative study in 2001 by Central bank of Nigeria(CBN), Nigerian Institute for Social and Economic Research(NISER) and National Bureau of Statistics(NBS), there remains a large scope for clearer description and better explanation of he Nigerian informal sector,” he said.


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