THE ROLE OF INFORMAL SECTOR IN UNEMPLOYMENT REDUCTION IN NIGERIA

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

All over the world today, the concept of the informal sector has been applied to analyze the employment situation and policy option in most developing countries including Nigeria. Formal and informal sector features characterize the nature of the labour markets in West Africa. Particularly characterized by this dichotomy is the urban labour market. The cardinal differences between the formal and informal sectors can be seen in the light of the segmentation between the different parts of labour market in Nigeria. In Nigeria, as in other parts of Africa, segmentation relates mainly to economic phenomenon. Workers/employees in the formal sector have higher levels of education/specialization than those in the informal sector, and since these firms are likely to have technologies requiring more skills and on-the-job training, the workers are likely to be more skilled and enlightened (Engelbrecht, 1987). The sophistication in operations and skilled requirement for labour in the formal sector attract higher remuneration than their informal sector counterparts, that covers all semi-organized and unregulated small scale activities largely undertaken by self-employed or those employing only a few workers, excluding farming and pastoral activities (Odekunle, 2000). The reducing employment ability of the formal sector was also occasioned by the reduction in economic activities in the main sectors of agricultural and manufacturing due to prolong neglect. The recent restructuring of the public sector and the privatization of some government institutions in the country resulted into a restrictive government employment policy, which further reduced the sector’s potentials for employment generation. The small size of the formal labour market also reflects the constraints facing the sector, such as high risks, poor infrastructure and lack of social capital (Engelbrecht, 1987). As a result, the formal sector has become increasing unable to generate employment and this has highlighted the informal sector’s importance in absorbing the increasing labour force in the country. At the policy level, deliberate government policies directed at employment generation has been totally successful. Example of such policies are the NEEDS strategy, the Millennium Development Goals (MDGs) which was later domesticated in the 7-point agenda of President Yar’Adua in 2007 and President Goodluck’s Transformation Agenda involving YouWin, Sure-P, and so on, have not holistically addressed unemployment in the country. The dimension of unemployment in Nigeria transcends the normal inadequate job opportunities and resource underutilization; it includes the gross mismatch between job expectation and the actual job availability. The problem has become severe to the extent while many household members don’t have any stable source of income; others are merely striving for survival. Research has shown that about 70% of the people live below the poverty line (NBS, 2012); it is no doubt that unemployment is a major contributor to this. Thus many stakeholders in employment issues are worried about this development and have sought for alternative sector with high labour carrying capacity, ostensibly like the informal sector. These trends have resulted to the rapid expansion in the informal sector employment. An increasing number of people are becoming dependent on the informal sector activities as a source of income and employment in both rural and urban areas. However, certain characteristics of the sector still raise questions about this sector’s potentials for effective income and employment generation. Studies on the informal sector have shown that despite the proliferation of informal sector activities, many of them are not viable (Akerele, 2002). Informal sector activities are normally characterized by small size of activities, few workers (often less than six) and working in make shift structures. All these hamper the potential growth and contribution of the sector’s potential in raising incomes for its participants. One significant characteristics of the sector is that it has grown; it has also become an employer of labour force in the country. Since the informal sector is the next place people can go to earn some income, many researchers have therefore become increasingly interested in the informal sector.

STATEMENT OF THE GENERAL PROBLEM

There has been a general outcry on the persistent rise in the unemployment rate in Nigeria. This has led an army of angry and desperate unemployed youths prowling cities and the unending influx of youth into the urban areas which has now posed further threat to an already precarious state of national security (Hernando 2013). The unemployment situation has denied its victims their legitimate means of livelihood, and in order to survive, they now involved in all forms of criminality which threaten the peace of the society. The informal sector which ought to be a saving grace for the unemployed has continued to suffer from comprehensive absence of Social protection, vocational education facilities, access to the business friendly credits, unfair competition through dumping of manufactured goods from more industrialized countries, inadequate infrastructure, lack of representation and participation in decision-making processes resulting in unworkable, corruption prone public policies and programmes that have failed significantly to solve the problems in the informal sector. It is against this background that this research is being carried out. The major objective of this research is to examine the role of the informal sector in employment provision and generation and its function as a buffer between employment and

AIMS AND OBJECTIVES OF THE STUDY

The major aim of the study is to examine the role of the informal sector in unemployment in Nigeria. Other specific objectives of the study include;

1. To examine the major causes of unemployment in Nigeria.
2. To assess the level of unemployment in Nigeria.
3. To determine the relationship between informal sector and unemployment reduction in Nigeria.
4. To determine the effect of unemployment on the economy of Nigeria
5. To recommend ways of reducing unemployment through the informal sector.

RESEARCH QUESTIONS

1. What are the roles of the informal sector in unemployment reduction in Nigeria?
2. What are the major causes of unemployment in Nigeria?
3. What is the level of unemployment in Nigeria?
4. What is the relationship between informal sector and unemployment reduction in Nigeria?
5. What are the ways of reducing unemployment through the informal sector?

RESEARCHY HYPOTHESES

H01: There is no significant relationship between informal sector and unemployment reduction in Nigeria

H02: There is no significant relation between employment reduction and economic development

SIGNIFICANCE OF THE STUDY

The study would be of immense importance to government as it highlights the roles of the informal sector in reducing unemployment in Nigeria. The study would also benefit students, researchers and scholars who are interested in developing further studies on the subject matter.

SCOPE AND LIMITATION OF THE STUDY

The study is restricted to the role of informal sector in unemployment reduction in Nigeria from 1980-2015 using Kano state as the case study.

LIMITATIONS OF THE STUDY

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview)

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.