President Tinubu and his administration stand at a critical juncture, faced with the weighty decision of heeding the counsel of the International Monetary Fund (IMF). As elders wisely say, “To be forewarned is to be forearmed.” It is imperative that they tread cautiously, recognising the potential ramifications of hastily adopting advisory policies.
Policy formulation and execution should not be swayed by sentimentality or speculative conjectures, particularly those contingent upon hypothetical scenarios. Succumbing to such an approach’s risks exacerbates hardship, leading to adverse repercussions despite initial optimistic projections.
Q: “While President Tinubu initially garnered praise for the courageous move to abolish subsidies, the passage of time has unveiled a disheartening reality: the anticipated benefits have failed to materialise as expected.”
Nigeria finds itself ensnared in precisely such a predicament. While President Tinubu initially garnered praise for the courageous move to abolish subsidies, the passage of time has unveiled a disheartening reality: the anticipated benefits have failed to materialise as expected. Socio-economic factors and broader macroeconomic indicators unequivocally illustrate this stark truth, revealing that almost 365 days into his presidency, the nation is still grappling with the fallout.
Each nation boasts its own economic structure, intricately woven with distinctive characteristics that govern its market dynamics. In Nigeria’s case, our economic landscape is defined by a blend of formal and informal sectors.
The informal economy, often synonymous with the informal sector or shadow economy, constitutes a substantial segment of our economic fabric. It operates beyond the realm of taxation and governmental oversight, carving its own path within the larger economic ecosystem.
Recent data from the Nigeria Bureau of Statistics (NBS) underscores the pervasive grip of informal employment, not only within Nigeria but also across other developing nations. The prevalence of informal employment, quantified by the proportion of individuals engaged in informal sector activities, presents a sobering reality.
In the second quarter of 2023, the informal employment rate soared to an alarming 92.7 percent. This enduring trend disproportionately affects women, burdening them more heavily than their male counterparts.
Delving deeper into demographic nuances, it becomes apparent that informal employment impacts various age brackets disparately. Young individuals aged 15 to 24 and seniors above 65 find themselves particularly susceptible to informal labour. Geographically, rural locales bear the brunt of informality, boasting a staggering 97.3 percent rate, while urban centres contend with a slightly lower but still substantial rate of 88 percent.
Education, often heralded as a gateway to formal employment, unveils a troubling correlation with informality. Individuals with higher educational attainments are less likely to be ensnared in informal labour, underscoring the pivotal role of education in unlocking economic avenues. Alarmingly, nearly all individuals devoid of formal education—an overwhelming 99.6 percent—find themselves entrenched in the informal economy.
The magnitude of Nigeria’s informal economy is staggering, estimated at a formidable 58.2 percent of the nation’s GDP, equivalent to approximately $1,230 billion at GDP PPP levels. These revelations stem from the recent data unveiled in the World Economic Quarterly Informal Economy Survey (QIES) for 2024.
Amidst Nigeria’s economic trials, the IMF’s exhortations to dismantle subsidies warrant meticulous contemplation. Already burdened citizens and businesses contend with mounting pressures, exacerbating poverty rates, and escalating production costs.
In this precarious situation, additional premature subsidy removal could compound the strain on an already burdened populace. Hence, policymakers must proceed with caution, ensuring that any economic reforms prioritise the well-being and stability of Nigerian society.
•BusinessDay Editorial
