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The size of the informal economy in Nigeria: a structural equation approach

Roberto Dell'Anno (Department of Economics and Statistics, Università degli Studi di Salerno, Fisciano, Italy)
Omobola Adu (Department of Economics and Development Studies, Covenant University, Ota, Nigeria)

International Journal of Social Economics

ISSN: 0306-8293

Article publication date: 28 July 2020

Issue publication date: 5 August 2020

625

Abstract

Purpose

This paper contributes to the literature concerning the Nigerian informal economy (IE) by estimating its size from 1991 to 2017 and identifying the major causes.

Design/methodology/approach

A structural equation approach in the form of the multiple indicators multiple causes (MIMIC) method is used to estimate the size of the Nigerian IE.

Findings

The results indicate that vulnerable employment and urban population as a percentage of the total population are the main drivers of the IE in Nigeria. The IE in Nigeria ranges from 38.83% to 57.55% of gross domestic product (GDP).

Research limitations/implications

As a result of the empirical challenges in the estimation of the IE, the estimates of Nigeria's IE are considered to be rough estimates.

Originality/value

The authors calibrated the MIMIC model with the official estimate of the informal sector published by the Nigerian National Bureau of Statistics (NBS). This was an attempt to combine the national accounting approach, to estimate the size of IE, with the MIMIC approach, and to estimate the trend of informality.

Keywords

Acknowledgements

The authors thank the two anonymous referees for their comments and suggestions.

Citation

Dell'Anno, R. and Adu, O. (2020), "The size of the informal economy in Nigeria: a structural equation approach", International Journal of Social Economics, Vol. 47 No. 8, pp. 1063-1078. https://doi.org/10.1108/IJSE-12-2019-0747

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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