It's Time the Informal Sector is Given Recognition

The federal government has been advised to recognise Nigeria’s dynamic informal business community as a fundamentally positive national asset.

The Chatham House, the Royal Institute of International Affairs, gave this advice in a recent report on Nigeria’s informal sector. The report stressed that it is only when such recognition manifests itself in the implementation of reform will it be truly meaningful.

For instance, it urged the government to view its taxi drivers, wholesale and retail marketers and distributors, private educators, hairdressers, mobile phone card vendors, transporters and shop owners as economic partners who can help to build growth, prosperity and employment prospects.

“The Nigerian government must also be realistic and transparent about the drivers of informal activity,” it stated.

According to the report, Nigeria cannot seal its borders; nor can it abolish West Africa’s parallel currency market, saying that if the conditions for trading formally are too difficult or expensive, business people would simply move their goods by informal routes instead.

“If small traders cannot make or receive cross-border payments easily and cheaply through the officially regulated financial system, they will simply turn to the unregulated parallel market. They cannot be stopped from doing so. The government should therefore give absolute priority to measures that simplify formal trading procedures and make it easier and less costly for exporters and importers to move their activity into the formal realm.

“The current environment in which trade issues are reviewed and policies are formulated is fragmented and disorganised. Numerous practical measures, some costly but many quite inexpensive, could help formal trade flow more smoothly and assist businesses in the transition from informal to formal operation,” it added.

In addition, it listed key steps that should be taken to harness the opportunities in the informal sector to include the need to strengthen the resources and capacity of the newly enlarged Federal Ministry of Industry, Trade and Investment. This, the London-based independent policy institute noted would create a clear policy lead and expert focal point for tackling trade issues. It also opined that it would help to coordinate action across all key government ministries, departments and agencies.

“Approve a simple system between commercial banks for cross-border payments. The current arrangements are a massive disincentive to trade formalisation, and one of the most consistent causes of complaint from business. West Africa’s integration and the development of formal trade within the region should not be kept waiting for the distant day when a single currency may be set up.

“The urgent priority is to ensure that cross-border trade payments can be easily made under the monetary regimes that exist now in Nigeria and in the member countries of the West African Economic and Monetary Union (UEMOA).

“The Central Bank of Nigeria and BCEAO, the central bank of UEMOA, should urgently conclude the revision of cross-border commercial banking regulation to allow banks to operate simple services for small and medium-sized businesses to make trade payments directly from naira to CFA francs and vice-versa.

“If Nigeria is to fulfill its real potential as the trading engine of the West and Central African regional economy, policy-makers need to create an environment that encourages trade to flow through recorded channels. They should seek to understand the needs of business and take the steps that will allow exporters and importers to operate formally and thus enhance the long-term efficiency and quality competitiveness of the Nigerian and wider West African economy,” it added.

While noting that the issues addressed in the report concerns business and the wider private sector in Nigeria and across the ECOWAS region, it however pointed out that as the largest economy and biggest market in West Africa, Nigeria is strategically placed to take a lead in addressing these challenges by fostering stronger and deeper neighbourly relations.

Furthermore, the report stated that there is the tendency to see informality as something that benefits neighbouring countries while causing problems for Nigeria.

“But in reality there are benefits and downsides in both directions and there is a readiness among neighbouring states to promote formalisation. This goodwill can be matched by Nigeria. Workable solutions can be achieved through the various directorates of ECOWAS and bilateral commissions such as the Nigeria–Niger Joint Commission for Cooperation and the Nigeria–Benin Joint Commission.

“ECOWAS is gradually constructing a framework for West Africa’s international trade. This should improve conditions for business to operate formally, through measures such as the Common External Tariff and the draft Economic Partnership Agreement (EPA) with Europe.

“As the implementation of these measures reaches the final crucial stages, Nigeria will need to engage more fully with a mind-set of enlightened self-interest. Germany, Europe’s biggest economy, is engaged at the highest levels in shaping European Union policy in a way that protects its national interests and strengthens its global influence,” it stated.

While pointing out that just like Germany, Nigeria has a similar weight in ECOWAS and capacity for influence, it urged policy makers in the West African country to give high priority to engaging in the shaping of ECOWAS trade policy and the community’s stance in international negotiations; and prioritise the incorporation of ECOWAS trade policy into  Nigeria’s national legal and policy framework.

“Civil service and diplomatic posts dealing with these issues and in the ECOWAS secretariat itself should be categorised as senior prestige roles requiring expertise and thus an avenue for promotion. Public officials in these positions should be fully trained to analyse technical aspects of trade issues using modern techniques.

“Take the lead specifically through the Nigeria Immigration Service (NIS) and Nigeria Customs Service in fully incorporating into domestic law and promoting the ECOWAS Protocol on Free Movement of Persons. This would assist formalisation of cross-border trade, deepen regional economic integration and strengthen domestic economic growth.

“Harassment at the border is a major complaint of Nigerian traders and their West African counterparts. Border management agencies should prioritise procedural overhauls and staff training to reduce the time spent by citizens of ECOWAS member countries  in going through formalities at Nigeria’s borders,” it added.

Source: www.thisdaylive.com