EXPANDING FRONTIERS OF NIGERIAN FORMAL ECONOMY.

The recent report on the split between formal and informal sectors of the Nigerian economy indicated that in 2015 the formal one contributed only about 60% to the nation's gross domestic product.

Apart from the obvious correlation that this must have been an estimate of sorts since it hard to truly capture or reflect the informal economy, it stands to reason that much has to be done deliberately to expand the frontiers of the formal sector.

There are two ways to do this: Create the enabling environment for option for formal operations or set in motion policies and strategies to formalise existing informal sector.

Both ought to be deployed simultaneously. The first option is more popular as in encouraging more local and foreign investment, establishing open market institutions that  will allow for more investment choice and as much as possible allowing most markets to be supply and demand driven especially when scarcity or monopoly do not pose threat to efficient resource allocation.

This has been the more talked about option but formalising more aspects of the economy deserves political attention too.

Hitherto most governments focussed on the income yield potential of small and medium scale operators  in the form of multiple taxes and levies. Unfortunately, formalising them offers greater potential to increased contribution to the economy.

For example, according to the Standards Organisation of Nigeria (SON) tiny Ghana exhibited more foresight by establishing internationally certified testing laboratory for agricultural products years before Nigeria did in 2014.

The result was that some agricultural products from Nigeria had to be tested and certified in Ghana before they could be exported.

Now since 2014 this can be done here and so, offers a good opportunity to relate with and formalise those operating therein.

It stands to reason that the temptation to react to smes as non tax payers, importers of substandard goods and producers of unregistered and uncertified products, may not be the best.

Instead once caught for one breach or the other,  the emphasis should shift from punishing according to the law for the breach, to taking steps for formalise to guide against repeat breach or devising more underground ways to stay afloat.

Thus, formal institutions and policies ought to be established to encourage and increase SME capacity to produce and package to standards, keep books and accounts that make for better decision making and reward smes for top inputs into the formal economy annually.

They can produce for exports and so contribute to much needed foreign exchange earnings, as middle men they could be recruited into the buy and sell Nigerian campaign and more importantly, align them to respond to economic and monetary policy stimuli.

None is a law breaker, substandard goods importer or producer by birth but by native human instinct to survive at all cost increasingly trying times. Yet they do contribute to the economy, it is just that unreported economic activities only be estimated not measured for s fact.