Leveraging informal sector potential to drive outsourcing

Considering the formidable informal sector as a cornerstone of the Nigerian economy, maximising its enormous capacity can drive sustainable growth of outsourcing business, GLORIA NWAFOR writes.

Global dynamics have radically transformed labour markets, affecting the lives and prospects of billions of workers, notably in developing economies where the informal sector is the source of employment.

The informal sector, which is a vibrant and core part of the Nigerian economy, is often misunderstood and overlooked despite being a treasure trove of untapped talent and skills.

The sector, experts said, often gets marginalised on the periphery of formal economic frameworks and policy interventions, saying the unfair neglect limits its growth and performance.

Indeed, Nigeria has the largest informal sector in Africa, which contributed about 60 per cent to the country’s GDP of $362.8 billion in 2023.

For comparison, last year, Nigeria’s informal sector surpassed the combined GDP of Ghana, Tanzania and Zimbabwe.

Consisting mostly of unregistered and unregulated small-scale farmers, traders, artisans and service providers, Nigeria’s informal sector, which plays a pivotal role in poverty alleviation and economic resilience, provides livelihoods for millions and employs about 80 per cent of the workforce.

However, stakeholders have said that harnessing its huge potential can revolutionise the outsourcing industry and propel the economy to new heights.

For instance, known for its nimbleness, flexibility, adaptability and entrepreneurial drive, they described how it transformed and expanded the gig economy as a pragmatic and effective response to the disruptive ramifications of the COVID pandemic.

They argued that transforming the informal enterprises would unlock innovation and diversify services and also create a more robust outsourcing economic system that could interlock the informal sector and the outsourcing industry.

Chairman of Polar-Afrique Consulting, Dr Chris Itsede, said outsourcing involves leveraging diverse skills and capabilities, which abound in the informal sector with abundant, but untapped potential.

He said in recent times, the global outsourcing industry has witnessed remarkable growth as robust global spending reached an estimated $731 billion in 2023.

Reeling out statistics to back up his position, he said in Nigeria, the Business Process Outsourcing (BPO) market was valued at about $980 million in the same year.

Projected to grow at a rate of 12.56 per cent yearly, Itsede said the Nigerian BPO market could cross the $1.8 billion mark by 2028.

This, he said, indicates the industry’s critical role in today’s economy and the increasing reliance of businesses on outsourced services to drive efficiency, innovation, and scalability.

Itsede quoted the figures at the 10th fellowship investiture/induction conference of the Association of Outsourcing Professionals of Nigeria (AOPN), where he spoke on ‘Unlocking the Nigerian Informal Sector for Sustainable Outsourcing Growth.’

Noting that the task to unlock the potential of Nigeria’s informal sector for sustainable outsourcing growth was both challenging and rewarding, he said it calls for efforts by governments, industry stakeholders, tertiary institutions, and the informal and outsourcing sectors.

He stressed that there was no doubt that an empowered and energised informal sector interlocked with the outsourcing ecosystem could create a more inclusive economy that optimally husbands all available resources and talents to the benefit of the people.

In overcoming the challenges, the Polar-Afrique Consulting boss emphasised the critical roles of research and data collection, policy development and regulatory support, formalisation of outsourcing projects as well as access to technology and infrastructure, among other factors.

He listed the actionable programmes to include expanding the talent pool, reducing costs to offer competitive pricing to outsourcing entrepreneurs and enhancing innovation.

The Nigerian Export Promotion Council (NEPC) said that unlocking the informal sector for sustainable outsourcing growth requires a collective effort as Nigeria’s future lies in its ability to harness every ounce of potential within its people and industries.

The council said by unlocking the informal sector, the country is not just empowering individuals but creating pathways for national prosperity as well as transforming Nigeria into a hub for sustainable outsourcing growth.

As a regulator, Director-General/Chief Executive Officer of the National Information Technology Development Agency (NITDA), Kashifu Abdullahi, said the agency has identified outsourcing as a key driver in creating jobs, boosting productivity and attracting investments to the nation.

He said the National Outsourcing Strategy aims to
harness Nigeria’s vibrant human capital, leveraging technology to position the country as a premier outsourcing destination on the global stage.

Also, the Managing Director/Chief Executive of Nigeria Social Insurance Trust Fund (NSITF), Oluwaseun Faleye, emphasised that there is an urgent need to explore the untapped potential of the country’s informal sector in driving sustainable growth through outsourcing initiatives.

He said by exploring the dynamics of the informal economy; the informal sector could strengthen the outsourcing industry through strategies and effective collaboration among stakeholders like government, outsourcing firms, MSMEs and the labour market.

Being hopeful of an improved business climate in the coming year, the President of the AOPN, Mope Abudu, said that there are opportunities in the outsourcing marketplace if members could justify the value they bring.

She urged that there is a need for members to prioritise the workforce and share knowledge to support each other.