Main Article Content

Abstract

The informal economy has consistently contributed to social and economic development through income and job creation, thereby enhancing people’s well-being. This paper examines the implications of existing policy gaps in Nigeria’s informal sector and how these gaps contribute to the welfare burden on informal-sector workers. The study provides a description of the informal economic sector and offers a general overview based on relevant literature. Data from the Nigerian Bureau of Statistics (NBS), the International Labor Organization (ILO), and the International Monetary Fund (IMF) were used to assess the size and components of Nigeria’s informal economy, as well as its role in the country’s economic growth and the welfare of its people. The study finds that informal sector significantly supports welfare through job creation and functions as an economic shock absorber. The study concludes that the government should recognize and prioritize the informal economy in its development policies and implement a more inclusive and equitable social protection framework to lessen the welfare burden on informal-sector workers.

Keywords

Informal economy informal sector workers welfare burden social protection Nigeria

Article Details

Author Biographies

Adebukola O. Dagunduro, Olabisi Onabanjo University, Nigeria

Adebukola Dagunduro specializes in industrial sociology, human resource management, and labor relations. She is a lecturer in the Department of Industrial Relations and Personnel Management at Olabisi Onabanjo University.  She holds a PhD in Industrial Sociology and has extensive experience teaching and mentoring students.

Joseph Jiboku, Olabisi Onabanjo University, Nigeria

Joseph Jiboku is a senior lecturer in the Department of Industrial Relations and Personnel Management at Olabisi Onabanjo University, Ago Iwoye. 

How to Cite
Dagunduro, A., & Jiboku, J. (2025). Social Policy Gaps and the Welfare Burden of Informal Sector Workers in Nigeria. Pan-African Journal of Education and Social Sciences, 6(2), 1–12. https://doi.org/10.56893/pajes2025v06i02.01

References

  1. Aguilar, A. G. & Guerrero, F. M. L. (2020). Informal sector. In A. Kobayashi (Ed.). International Encyclopedia of Human Geography (2nd ed., pp. 279-288), Elsevier.
  2. Aryeetey, E. (2021). Informal economies. Oxford Research Encyclopedia of African History. Oxford University Press. https://doi.org/10.1093/acrefore/9780190277734.013.753
  3. Atkin, D., Faber, B., Fally, T., & Gonzalez-Navarro, M. (2024). Measuring welfare and inequality with incomplete price information. The Quarterly Journal of Economics, 139(1), 419–475
  4. Augustine, A. A., Olaoye, A. S., & Lawal, A. B. (2020). Informal sector and tax compliance in Nigeria: Challenges and Opportunities. International Journal of Emerging Trends in Social Sciences, 8(2), 57–69. https://doi.org/10.20448/2001.82.57.69
  5. Bastian, B. L.; Metcalfe, B.D.& Zali, M.R. (2019). Gender inequality: Entrepreneurship development in the MENA Region. Sustainability, 11 (6472). https://doi.org/10.3390/su11226472
  6. Bank of Industry (BOI) (2022). Economic development through the Nigerian informal sector: A BOI perspective. https://www.boi.ng/economic-development-through-the-nigerian-informal-sector-
  7. Burton, M. D., Fairlie, F.W., & Siegel, D. (2019). Introduction to a special issue on entrepreneurship and employment: Connecting labor market institutions, corporate demography, and human resource management practices. ILR Review, 72(5), 1050–1064. https://doi.org/10.1177/0019793919866409
  8. Chen, M. A. (2012). The informal economy: Definitions, theories and policies. WIEGO Working Paper No. 1. Women in Informal Employment: Globalizing and Organizing (WIEGO). https://www.wiego.org/publications/informal-economy-definitions-theories-and-policies
  9. Chipman, J. S., & Moore, J. C. (1978). The new welfare economics, 1939–1974. International Economic Review, 19(3), 547–584. https://doi.org/10.2307/2525843
  10. Cooper, K., Fabian, M., & Krekel, C. (2023). New approaches to measuring welfare. Fiscal Studies, 44(2), 123–135. https://doi.org/10.1111/1475-5890.12333
  11. Cole, W. E, & Fayissa, B. (1991). The urban subsistence Labour force: Toward a policy oriented and empirically accessible taxonomy, World Development, 19 (7), 779-789. https://doi.org/10.1016/0305-750X(91)90132-2
  12. Dell'Anno, R,. & Adu, O. (2020). The size of the informal economy in Nigeria: a structural equation approach. International Journal of Social Economics, 47 (8), 1063-1078. https://doi.org/10.1108/IJSE-12-2019-0747
  13. Etim, E., & Daramola, O. (2020). The informal economy and economic growth of South Africa and Nigeria: A comparative systematic review Journal of Open Innovation: Technology, Market, and Complexity, 6, (4). https://doi.org/10.3390/joitmc6040134
  14. Frosch, M., & Walsh, K. (2025). Understanding the informal economy and informal employment – the statistical challenge. Statistical Journal, 15(2), 123-145. https://doi.org/10.1177/18747655241298565
  15. Garzarelli, G., & Limam, Y. R. (2019). Physical capital, total factor productivity, and economic growth in sub-Saharan Africa. South African Journal of Economic and Management Sciences, 22(1). https://doi.org/10.4102/sajems.v22i1.2309
  16. Haughton, J., & Khandker, S. R. (2009). Handbook on Poverty and Inequality. World Bank. https://doi.org/10.1596/978-0-8213-7613-3
  17. Holmes, R., Akinrimisi, B., Morgan, J., & Buck, R. (2012). Social protection in Nigeria: Mapping programmes and their effectiveness. Overseas Development Institute (ODI). https://odi.org
  18. International Labour Organization (ILO) (2003). Report 1, General Report. In Proceedings of the 17th International Conference of Labour Statisticians, Geneva, Switzerland, 23 November–3 December 2003. https://www.ilo.org/meetings-and-events/17th-international-conference-labour-statisticians
  19. International Labour Organization (ILO). (2012). Employment and Gender Differences in the Informal Economy.
  20. International Labour Organization (ILO). (2018). Women and Men in the Informal Economy: A Statistical Picture (3rd ed.). International Labour Organization: Geneva, Switzerland. https://www.ilo.org/publications/women-and-men-informal-economy-statistical-picture-third-edition
  21. International Labour Organization (ILO). (2023). Informal economy. https://www.ilo.org/ilo-employment-policy-job-creation-livelihoodsdepartment/branches/employment-investments-branch/informal-economy
  22. International Monetary Fund (IMF). (2022). Nigeria: Selected issues paper—Informal sector dynamics. IMF Country Report No. 22/92. https://www.imf.org/en/Publications/CR/Issues/2022/03/01/Nigeria-Selected-Issues-514152
  23. Johnston, M. P. (2014). Qualitative and Quantitative Methods in Libraries, (QQML) 3, 619-626.
  24. Kassahun, H. T., Jacobsen, J. B., & Nicholson, C. F. (2020). Revisiting money and labor for valuing environmental goods and services in developing countries. Ecological Economics, 177. https://doi.org/10.1016/j.ecolecon.2020.106771
  25. Kungwansupaphan, C., & Leihaothabam, J.K.S. (2016). Capital factors and rural women entrepreneurship development: A perspective of Manipur state, India. Gender in Management: An International Journal 3 May 2016; 31 (3): 207–221. https://doi.org/10.1108/GM-04-2015-0031
  26. Mahadea, D., & Zogli, L.K.J. (2018). Constraints to growth in informal economy activities and formalization: A case study of Ghanaian slums. The South African. Journal of. Entrepreneurship and Small Business. Management, 10(1), 1–9. https://journals.co.za/doi/abs/10.4102/sajesbm.v10i1.130
  27. Meyer, B. D., & Sullivan, J. X. (2003). Measuring the well-being of the poor using income and consumption. The Journal of Human Resources, 38(1), 118-155. https://doi.org/10.2307/3559022
  28. Muhammad, S., Kong, X., Saqib, S. E, & Beutell, N. J. (2021). Entrepreneurial income and wellbeing: Women’s informal entrepreneurship in a developing context. Sustainability, 13(18). https://doi.org/10.3390/su131810262
  29. National Salaries, Incomes and Wages Commission (NSIWC). (2024). Incomes survey of the informal sector of the Nigerian economy 2023. https://nsiwc.gov.ng/incomes-survey-of-the-informal-sector-of-the-nigerian-economy-2023/?utm_source=chatgpt.com
  30. NBS (2023). Nigeria Labor Force Survey Q2, 2023
  31. OECD/ILO (2019). Tackling Vulnerability in the Informal Economy, Development Centre Studies, OECD. https://doi.org/10.1787/939b7bcd-en.
  32. Ogunniyi, A., & Olagunju, K. (2024). Participation and returns from informal service-oriented non-farm enterprises: Evidence from a survey of Nigerian households. PLOS ONE, 19(2), e0298794. https://doi.org/10.1371/journal.pone.0298794
  33. Onwo, A. O., & Ohazulike, G. A. (2021). Employment in the informal sector in Nigeria: Implications for sustainable economic development. UNIZIK Journal of Business, 4(1). https://doi.org/10.36108/unizikjb/1202.40.0160
  34. Osiki, A. (2020). ‘Esusu cooperative’ as a means of extending social protection to the Nigerian informal economy. Contemporary Social Science, 15(4), 461–475. https://doi.org/10.1080/21582041.2020.1766695
  35. Pettinger, T. (2017). Economic Downturn Definition. https://www.economicshelp.org/blog/6976/economics/economic-downturn-definition/
  36. Premium Times Nigeria (2023). The informal economy: The backbone of Nigeria’s economy. Premium Times Online. https://www.premiumtimesng.com/opinion/647617-the-informal-sector-the-backbone-of-nigerias-economy-by-ibrahim-shelleng.
  37. Sakanko, M.A., & Ewugi, M.S. (2017). An evaluation of the impact of informal economy on economic growth in Nigeria using error correction model (ECM). Lapai International Journal of Administration, 1(2), 165–177.
  38. Sen, A. (1999). Development as Freedom. Oxford University Press.
  39. Uko, F. E., Akpanoyoro, M. J., & Polycarp, E. J. (2020). An evaluation of the contribution of the informal sector in employment and income generation in Nigeria: Thematic approach. Social Sciences and Management International Journal, 1(2), 66–92.
  40. United Nations Conference on Trade and Development (UNCTAD). (2021). Informal employment. Development and Globalization: Facts and Figures 2021. https://dgff2021.unctad.org/annexes/glossary/informal-employment/
  41. WIEGO. (2023). Understanding the Informal Economy. https://www.wiego.org/informal-economy/