Analysis of the Informal Economy and Its Contribution to GDP in Ogun State

The informal economy contributes significantly to national output and employment in Nigeria, yet its measurement and contribution remain underestimated in official statistics, and analysing it in Ogun State provides insight into the scale and character of South West Nigeria's unrecorded economy. This study analysed the size, structure, and GDP contribution of the informal economy in Sagamu, Abeokuta North, and Ijebu-Ode Local Government Areas, Ogun State. A household enterprise survey covering 240 informal business operators was conducted. Data collected covered business type, revenue, employment creation, tax status, and growth constraints. The Currency Demand Approach was applied to estimate the informal economy's GDP share. Results showed that the informal economy was estimated to constitute 43.7 percent of Ogun State's real economic activity. Informal enterprises in trade, food services, and artisan activities employed an estimated 62 percent of the active workforce in the surveyed LGAs. Only 14.6 percent of informal operators had paid any form of business tax. Revenue per informal enterprise averaged N182,000 monthly, collectively representing a significant uncaptured tax base. Financing from formal banks was accessed by only 8.8 percent of informal operators. The study concludes that the informal economy is a major but under-recognised contributor to Ogun State's output. Recommendations include a tiered informal sector formalisation incentive, simplified business registration, microfinance linkages for informal operators, and a dedicated informal economy data collection survey by Ogun State Statistics Office.

Keywords: informal economy, GDP contribution, Ogun State, informal sector, economic measurement