Earlier in May this year, the Lagos State Government of Nigeria organised press conferences to widely publicise a rare achievement.

The regime that administers the former Nigerian capital and its economic hub reported a significant hike in internally generated revenue (IGR), average monthly figures for which were up from 10 billion Naira to 14 billion Naira.

Significantly, this was achieved without the introduction of any new taxes. Lagos policymakers had instead chosen to focus collection on the country’s thriving informal sector.

Nigeria has had a tumultuous history, marked by decades of virulent political and civilian strife since its independence in 1960. The oil boom of the ’70s brought windfall profits to the emerging state, but corruption and gross mismanagement blighted economic indicators and rendered the vast majority of its population destitute.

A reforms process initiated after the first democratically elected government was sworn to power in 1999 is beginning to show results, but hardly of the nature or scale that can reassure a country desperate to shake off its Third World heritage.

At the ground level, the extended economic stagnation and Nigeria’s persistent failure to enforce corrective policies spawned a flourishing informal economy _ the aggregate of financial and business activity that operates outside government control, contributing neither in taxes nor in contribution to the country’s GDP.

It includes everything from backyard employment and self_help finance to street vending and unregulated manufacturing. Nigeria’s vast informal economy of products, services and financial services was born out of necessity but is now estimated to contribute up to 65% of current Gross National Product.

Even with a significant readjustment of the percentage, there is no debate that the state is losing out on millions in internally generated revenue (IGR) because of activity in the unorganised sector. IGR, or inland revenue, refers to state earnings from levies and taxes. Although current figures for Nigeria’s federal IGR are unavailable, it has been traditionally diminutive in relation to the country’s oil profits, which account for 85% of state revenue.

Across the African continent in general and especially in Nigeria, the informal sector no longer plays an auxiliary role but leads official economies in terms of maintaining livelihoods and creating new jobs.

The present Nigerian government accepts that more than 90% of all new jobs are being created by this unorganised sector. The Lagos report in fact goes a long way to show that, even if only subconsciously, Nigeria is vitally dependent on its informal economy. Moreover, it needs to cultivate this sector and bring it under the tax regime if its long_term macroeconomic goals are to be achieved.

The Nigerian informal economy is therefore critical on two counts: in terms of untapped revenue and, more importantly, as the driving force behind rapid enterprise development for durable economic growth. This is what the government can do to gradually subsume the informal economy under its jurisdiction:

“Devise innovative policy to bring unorganised activities under official purview through a system of sops, tax breaks and finance aimed at both existing and emerging unregulated businesses.

“Streamline tax and business regulations for universal applicability; crack down on systemic corruption through stringent penalties.

“Promote a credit environment sympathetic to small business realities. Government effort should concentrate on promoting lending through equity, not debt, because Nigeria’s informal economy is mostly about high_risk ownership businesses.

“Improve productivity in small businesses through infrastructure development and removal of trade and administrative barriers. Enhancing technical support and capacity building assistance to aid existing and emerging entrepreneurs.

“Transform education at the vocational and skills level to create a dynamic manpower base that is equipped to meet entrepreneurial challenges. Creating supplementary programmes for relevant technology and computer education.