AFRICAN AND ASIAN STUDIES African and Asian Studies 11 (2012) 315-344 brill.com/aas The Informal Sector as a Catalyst for Employment Generation in Lagos State, Nigeria Akeem Ayofe Akinwale* Department of Industrial Relations and Personnel Management, Faculty of Business Administration, University of Lagos Akoka, Yaba, Lagos State, Nigeria Email: [email protected] Abstract Unemployment remains high in Nigeria due to disintegration between the formal and informal sectors, among other factors. While the unemployed largely focus on the formal sector in search of jobs, there is inadequate interest in the informal sector. Yet, this sector provides livelihoods for the majority of the population. This paper examines the informal sector as a catalyst for generat- ing employment in Lagos State, Nigeria, using the Social Capital Theory and a descriptive survey research design. Data were collected from 480 apprentices, 40 masters, 20 journeymen, and 120 members of various communities through a structured questionnaire, Key Informant Interviews and Focus Group Discussions, respectively. The findings showed that 64.8 percent of the respon- dents reported parental sponsorship of vocations in the informal sector, 14.2 percent of the respondents were self-sponsored, and the remainders (18.5 percent and 2.5 percent) were report- edly sponsored by their relatives and masters. Awareness of opportunities for self employment in the informal sector was demonstrated by 71 percent of the respondents. However, 66.3 percent of the respondents thought that schooling could be better than vocations in the informal sector. Mothers’ occupation significantly associated with individuals’ choice of vocation in the informal sector (χ2 = 33.71; P < 0.05). There was no significant difference in the proposed plans for self employment among the respondents in furniture and tailoring workshops (χ2 = 1.44; P > 0.05). Planning for self employment was significantly influenced by several factors including gender, age, mothers’ occupation, career plan, and satisfaction within the informal sector (t = 19.247, P < 0.01). The informal sector is vital for survival of youth in Lagos State, Nigeria. This sector should be supported for poverty eradication and entrepreneurial development. Keywords Development, economy, informality, self-employment, social capital * Many thanks to the reviewers of the paper for their invaluable comments. Special thanks to Professor Tukumbi Lumumba-Kasongo for his encouragement. © Koninklijke Brill NV, Leiden, 2012 DOI: 10.1163/15692108-12341236 Downloaded from Brill.com10/04/2021 08:40:23AM via free access 316 A. A. Akinwale / African and Asian Studies 11 (2012) 315-344 Introduction The informal sector provides alternative avenues for employment opportuni- ties compared to the formal sector, particularly the state owned enterprises (SOEs) and the organised private sector (OPS). It has been reported that the majority of the global population ekes out their livings from the informal sec- tor (Chukuezi, 2010; Horn, 2010; ILO, 2010; Porta and Shleifa, 2008; Meagher, 2007; Kohnert, 2006). The growth of the informal sector is due to several factors including low level of education, declining employment opportunities in the formal sector and lack of relevant skills (Horn, 2010; Meagher, 2007; Portes and Hoffman, 2003). In spite of the fact that many studies have been conducted on the informal sector in developing countries, Temkin (2009:141) observed that “so little is known about the informal workers individual perceptions, values, attitudes, and opinions.” Walsh (2010) linked the relatively inadequate knowledge about the informal sector to the fact that it is hidden from official scrutiny. Chukuezi (2010) recently called for further studies on the informal sector in recognizing the need for continued support for the sector. Previous research by Arimah (2001: 119) indicated that “any study that seeks to analyse the informal sector must depend on primary sources of data, since activities in this sector are hardly entered into official records.” Thus, this paper examines the high incidence of unemployment in Nigeria and the potential of the informal sector as a critical resource for employment generation. I specifically focus on the following questions: Why do people identify with or disentangle from the informal sector? What are the prospects and challenges associated with employment generation in the informal sec- tor? Can the informal sector be used to eradicate unemployment in Nigeria, and if so, how? An investigation into the above questions is grounded in social capital theory and survey research, involving structured interviews and focus group discussions with selected study participants from furniture and tailoring workshops in Lagos State, Nigeria. Economic downturns and inadequate opportunities for upward social mobility have been driving people’s participation in the Nigeria’s informal sec- tor since the 1980s. Also, some privileged individuals, including those from for- mal sector and middle-class commercial backgrounds, have resorted to the informal sector to prevent economic predicaments (Chukuezi, 2010; Meagher, 2007). Unemployment, however, remains high in Nigeria despite the relevance of the informal sector in employment generation. The 2006 survey by the Federal Ministry of Education showed that over 60 percent of the Nigerian youth were unemployed (Babalola, 2007). This can be Downloaded from Brill.com10/04/2021 08:40:23AM via free access A. A. Akinwale / African and Asian Studies 11 (2012) 315-344 317 attributed to the fact that entrepreneurs in the informal sector have not been adequately recognised and received support in Nigeria despite their actual and potential capacity for employment generation. There is indication that lack of recognition and optimum utilisation of the informal sector potentials can con- tribute to raise the level of unemployment and poverty. It has been shown that most Nigerians prefer employment in the formal sector, hence the popularity of white collar jobs (Akinbogun and Ogunduyile, 2009). Unemployment remains high in Nigeria, despite implementations of several national entrepreneurial programmes, including the National Directorate of Employment (NDE) and the National Economic Empowerment and Develop- ment Strategies (NEEDS). Although the NDE and the NEEDS were designed to promote socio-economic development, their operations have not matched the rising demands for employment opportunities in Nigeria (Chukuezi, 2010; Kolawole and Adepoju, 2007). Repeatedly, widespread unemployment, abject poverty and lack of social security have attracted concerns in Nigeria (NISER, 2003). This situation has become worrisome since the advent of accelerated globalisation and the adop- tion of neoliberal reforms, especially the Structural Adjustment Programme (SAP), followed by privatisation and deregulation of the State Owned Enter- prises (SOEs) in Nigeria. Against the above backdrop, this paper examines the informal sector as a catalyst for employment generation in Lagos State, Nigeria. As shown in differ- ent sections, the paper dwells on several issues associated with employment and the informal sector with reference to situations in Nigeria and elsewhere. The next section presents an overview of the Nigerian economy in an attempt to build a foundation for an analysis of the informal sector. This is followed by the discourse on employment generation in Nigeria and the concept of the informal sector. Theoretical framework and methodology are also discussed to enrich the paper. Then, the final sections of the paper focus on descriptive pre- sentation and analysis of the findings. An Overview of the Nigerian Economy With an area of 923,768 square kilometers, Nigeria officially emerged as a con- temporary state in 1914, sharing boundaries with four countries (Benin, Camer- oon, Chad and Niger). It emerged from the amalgamation of southern and northern protectorates, comprising diverse groups with various economic activities such as agriculture, pastoralism, fishing, trading, crafts, and medi- cine. Nigeria’s population rose to over 140 million in 2006 (Falola and Genova, Downloaded from Brill.com10/04/2021 08:40:23AM via free access 318 A. A. Akinwale / African and Asian Studies 11 (2012) 315-344 2009). The Nigerian traditional economy has been modified from hitherto reli- ance on agriculture and import substitution industrialisation to over depen- dence on crude oil since the 1970s (Chukuezi, 2010). The Nigerian government used the revenue derived from exports of agricul- tural products to finance its import-substitution industrialisation policy, which led to establishing many light industries such as food processing, textiles and fabrication of metal and plastic wares (Foucard, 2003). The contribution of agriculture to the Gross Domestic Product (GDP) fell from 60 percent in the 1960s to 31 percent in the early 1980s, due to official neglect and new policy choices. The main thrust of the Nigerian national development plans in the 1970s was on education, transport, water supply and urban infrastructure on the one hand and rapid industrialisation on the other. Thus, real economic activities have increased in non-agricultural sectors since the 1970s, thereby weakening the Nigeria’s traditional economy (Olani- yan, 2009). This provides a basis for relegating the informal sector in Nigeria, especially in the light of imposing a modern capitalist structure, which has pro- moted unemployment with increasing dependence