Having the right data alongside the integration of different intervention policies are major ingredients needed to unlock the huge potential in Nigeria’s informal sector, experts have said.
Nigeria’s informal sector is made up of individuals and micro-enterprises whose economic well-being is birthed and buoyed on the fringes of the formal economy. Their business activities remain unregulated and, oftentimes, completely unknown.
Initially, much of the rhetoric centred on the need to ‘manage’ this ever-expanding behemoth that the informal sector was becoming. With the event of COVID-19, the narrative has since evolved into one that seeks to formalise these businesses, by catering to their needs and providing them with much-needed support.
One significant revelation of the pandemic was the strength and importance of leveraging digital tools across the entire value chain, from financial transactions and services to customer service and beyond, the experts said on Wednesday during a webinar themed ‘Securing our Informal Economy Amidst a Post-Covid Reality’. The session was moderated by Olawale Ajai, a professor and policy lead, Sustainable and Inclusive Digital Financial Services initiative (SIDFS).
Onyeka Akpaida, founder and chief impact officer, Rendra Foundation, an agency working to promote financial literacy among northern women, said Nigeria needs to institutionalise the informal sector by getting all of them under one umbrella.
“I don’t understand how we have a national health scheme and the poor people cannot access it,” Akpadia said.
To cushion the economic effect of coronavirus, the government rolled out important relief measures, which include the provision of financial palliatives to over 11 million Nigerians listed on the National Social Register. But considering that the estimated need potentially cuts across nearly 100 million people, there are still significant lengths left to be covered.
“We must move beyond grants to microcredits and institutionalisation of the whole system,” Akpaida said.
She noted that Nigeria needs to merge the use of offline technology and person-to-person connection to reach people in rural areas and places where online technology cannot reach.
According to the International Monetary Fund (IMF), the informal sector accounts for approximately 65 percent of economic activities in Nigeria.
Godwin Ehigiamusoe, founder, LAPO Microfinance Bank, said fixing issues around policy area is a critical area Nigeria must examine in order to fix the informal sector.
“The issue of interest rate is usually very emotive when lending to this segment of borrowers; it’s usually very different to get a lower interest rate,” Ehigiamusoe said.
In order to help mitigate the effect of COVID 19, many financial service providers adopted moratoriums and reduced/no interest rates for small businesses.
The same approach was adopted on the Tradermoni and Marketmoni initiatives of the Federal Government being executed by the Bank of Industry.
Toyin Adeniyi, executive director at Bank of Industry (BOI), said the methodology used for these intervention programmes was critical in solving some of the challenges in the informal sector.
“We have to invite, engage the beneficiaries in a dialogue. We need to recognise them as stakeholders. We need to ensure that what we’re doing [the intervention] is affordable,” Adeniyi said.
Concerning access to intervention initiatives like loans, she said Nigeria needs to create a seamless process that would make it easier for every market woman in the street to access loans.
“We need to do a lot more in terms of engagement, which means all the stakeholders involved need to collaborate more,” Adeniyi said.
Tomi Adejana, co-founder and CEO of Bankly, a secure digital savings platform for the unbanked, said the COVID-19 pandemic showed how a lot of people in the informal sector were exposed to major issues associated with their savings.
“The issue of data is crucial when solving challenges in the informal sector,” she said.