77875 STUDY ON SKILLS DEVELOPMENT FOR THE INFORMAL SECTOR OF THE NIGERIAN ECONOMY Public Disclosure Authorized PREPARED FOR THE WORLD BANK Public Disclosure Authorized BY Public Disclosure Authorized NIGERIAN INSTITUTE OF SOCIAL AND ECONOMIC RESEARCH (NISER) IBADAN JUNE, 2009 Public Disclosure Authorized Chapter One: Introduction 1.1 Background to the Study The problems of employment have become a central global concern in recent times. This makes nearly all the governments and development partners to be fully engaged in finding a lasting solution to the problems. In the past, development planning efforts were concentrated on the development of a modern industrial sector. It was believed that this would serve the domestic market and facilitate the absorption of redundant or surplus workers in the urban economy. It was also the belief that rapid economic growth and development would be achieved. However, the ability of the modern industrial sector to absorb the migrants could not be realized. The inability of modern urban industries to generate a significant number of employment opportunities is one of the obvious failures of the development process in Nigeria over the last five decades. The public sector has not helped the situation in terms of employment generation due to the dwindling public sector revenue and the various reform measures that have led to downsizing in form of retrenchment. The foregoing makes the informal sector a better alternative for employment generation in the economy, the fact that has been recognized by scholars, policy makers and lately by the governments in developing countries. The informal sector therefore represents an important part of the economy and certainly of the labour market in most developing countries. It plays a major role in employment creation, production and income generation. It is widely believed that employment generation in the informal sector is a necessary survival strategy in countries that lack social safety nets and in the absorption of growing unemployed members of the labour force. Empirical enquiries have confirmed the vastness, resilience and dynamism of the sector (Akande and Akerele, 2008). The Nigerian government being in aware of this has undertaken various programmes, such as, National Directorate of Employment (NDE) and other employment generating activities. Employment generation forms the fulcrum of the 7-point agenda of the present administration in the country. It is the recognition of the efforts of government of Nigeria at combating employment problems that makes the World Bank (a development partner) to come up with a study on “Employment and Growth in Nigeria.” The study aims at assessing the impact of the recent strong growth performance on employment with a view to developing policies that are likely to strengthen the growth elasticity of employment and improve the quality of jobs. The study is premised on the fact that enhancing the growth elasticity of employment and the quality of jobs will require a coordinated strategy that will boost labour demand and strengthen the responsiveness of labour supply to labour demand. For labour demand to be enhanced in the economy, strategy that will promote growth in all the sectors must be adopted. There is also the need for a policy framework of skills development that will allow the labour supply to be sufficiently responsive to labour demand. The development 2 of skills and knowledge is seen as undeniably a major instrument for promoting decent work in the informal economy. 1.2 Statement of Problem Available statistics tend to indicate that formal sector employment opportunities in Nigeria can no more keep pace with the number of entrants into the labour market. The informal sector of the economy has come to the rescue by providing employment and income for the youth and those retrenched from the formal sector employment (Akerele, 1997). It is found from studies that not less than 75% of the labour force is engaged in the informal sector activities (Akande and Akerele, op cit). The stagnation in the formal sector employment has increased the probability of those entering the labour market for the first time to be engaged in the informal sector. It is found that the growth rate of employment in the informal sector will be about 11% in the next five years (Akande and Akerele, op cit). This points to the fact that future employment of youth may be tilted towards the informal sector. Unfortunately, the informal sector activities are characterized by low productivity, poor quality of products, inadequate production equipment, and insufficient technical skills. The issue of technical skills should take a central position if low productivity and poor quality of products must be tackled. The increase in the number of graduates of technical institutions may have positive impact on productivity in the informal sector but the general low level of skills still affects the growth of the sector activities and impacts on income negatively. Bringing basic skills training programmes to workers in the informal sector can help to bring down poverty and unemployment levels, while improving economic growth. The development of relevant skills and knowledge is a major instrument for improved productivity, better working conditions, and the promotion of decent work in the informal economy. A better less work-intensive and safer technologies can raise the productivity and income, reduce work drudgery and occupational risks to health and safety, and improve products. New skills and knowledge can open doors to more economically and socially rewarding jobs (Marjo-Riitta, 2003). Basic life skills, such as numeracy and literacy, problem-solving and management, communication and negotiation skills, are required to improve confidence and capacity to explore and try new income-earning opportunities (ILO 2000). In addition, better- educated entrepreneurs are generally also more responsive to policy measures, which is important for the sector's development. Improving productivity is essential to the survival and growth of informal units. It is also a prerequisite to their gradual formalization. The improvement of productivity requires, among other things, easier access to training, which has often been lagging behind other interventions such as credit. The positive impact of training on productivity in both the formal and informal sectors has been clearly demonstrated in the literature. The above conception led the World Bank into preparing this study to encompass four parts, namely; a statistical analysis of the evolution of the labour market since 1999; growth strategies: a review of the current policies of the government aimed at promoting specific sectors of the economy; trade policy: the case of trade liberalization; and skills 3 development for the informal sector in particular with respect to the responsiveness of the programmes to labour demand (World Bank, 2008). The part this study is addressing among the four parts is the skills development for the informal sector in Nigeria which has informed the choice of assessing skills development of the sector in the work. 1.3 Terms of Reference/Objectives of the Study From the terms of reference, this study is expected to look into further work on skills development for informal sector by reviewing and assessing the skill development programmes being run by non- state organizations, trade associations, private agencies and master crafts persons in Nigeria. The main objective of the study, therefore, is to review the effectiveness of the current skills development and employment promotion practices and programmes of the informal sector in Nigeria. 1.4 Structure of the Report The study is structured into five chapters. While chapter one looks at the background to the study, the terms of reference and the structure of the report, chapter two focuses on copious relevant literature on skills development bringing out the conceptual definitions, theoretical and empirical issues in the informal sector of the economy. Chapter three presents the methodology of how training providers as well as the beneficiaries of the programmes were surveyed in the study. Chapter four gives the inventory of the programmes for the informal sector skills development and a detailed analysis of 5 most important non- state-run programmes in the country. Chapter five forms the conclusions and recommendations of the work. 4 Chapter Two: Methodology 2.1 Methodological Assumptions The study chose to adopt the concept of the informal sector commonly used in statistical circles and to expand it in terms of how it is both understood and used by field workers and researchers. It, thus, used the definition of the informal sector adopted by the ILO‟ s Fifteenth International Conference of Labour Statisticians in January 1993 (Kante, 2002), which describes the Informal Sector as a subset within the household sector in National accounts. It consists of a fraction of household-owned enterprises, which are distinguished from corporations, and quasi-corporations in that they neither keep full sets of accounts nor constitute legal entities distinct from the households that own them. The informal sector could be broadly characterized as consisting of units engaged in the production of goods or services with the primary objective of generating employment and income to the persons concerned. 2.2 Nature and Sources of Data The aim of this study is to evaluate the impact of skills development training offered to informal sector operations in Nigeria. To achieve this evaluation we chose to utilize qualitative and some degree of quantitative research method, using in-depth interview as a research technique. The main reason for this research method is because of the complex nature of informal sector activities in Nigeria. The need to evaluate how skills development programme have benefited the selected respondents and the meaning they attach to it could best be arrived at through the use of in depth interviews. The research technique was chosen for the collection of data from about 160 respondents. The first set of interviews involved 84 state organizations, and 76 non-state organizations.