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Nigeria’s ‘shadow economy’ may fall to half by 2025

By Chijioke Nelson
03 July 2017   |   4:07 am
Going by an assessment of the on-going reforms in Nigeria, the number of informal sector operators may be cut by a near half in the next eight years.

Going by an assessment of the on-going reforms in Nigeria, the number of informal sector operators may be cut by a near half in the next eight years.

The development would mark a new dawn in not only recording actual contributions of various sectors in the Gross Domestic Product (GDP), but also improved revenue to the government by way of taxes.

Affirming the observations in its study, the Association of Chartered Certified Accountants (ACCA), said Nigeria is on course to reducing the size of its ‘shadow economy’.

It would also mean that the level of production and trade in legal goods and services that are deliberately and often illegally concealed from public authorities would be minimised.

Titled: “Emerging from the shadows: The shadow economy to 2025,” it estimated the opaque segment’s transactions at 48.37 per cent of the GDP in 2016 – an approximation of N49.6 trillion.

Similarly, the global average is expected to fall from 22.5 per cent to 21.39 per cent of GDP over the same period.

“The prevalence of shadow economy activity creates considerable practical and ethical issues for both business and government,” the Market Head for Nigeria, ACCA, Tom Isibor, said.

The Head, Sub-Saharan Africa Market, ACCA, Jamil Ampomah, said the expected fall in the shadow economy’s overall share of Nigeria’s GDP is a very positive sign that efforts to curb its impact have been implemented in recent years. “But there‘s still a long way to go,” he said.

“Our research estimates that the current factors that will determine Nigeria’s shadow economy are: corruption control, GDP per capita and bureaucratic quality.

“There are steps that government, business and society can take to curtail the shadow economy, ensuring that all workers and businesses retain the rights associated with the legal trade of goods and services,” he added.

Also, the Jane Ohadike, Regional Head of Policy, sub-Saharan Africa, ACCA, Jane Ohadike, noted that the shadow economy presents an enormous challenge for society and a huge potential opportunity for the profession (accountancy) to play an active role across the entire value chain.

“The roles involve from measurement and monitoring to helping shadow firms and individuals manage their financial affairs, and possibly make the transition from informal to formal.

“Effective management of the shadow economy requires action at all levels – government, cities, local communities and individuals,” she said.

ACCA is the global body for professional accountants that offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.

Till date, ACCA supports its 188,000 members and 480,000 students in 178 countries, helping them to develop successful careers in accounting and business, with the skills required by employers.

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