Economic independence in a dependent economy

In his opening statement in the Social Contract, Rousseau noted that man was born free but is everywhere in chains. Indeed, man was a free-living mammal, enjoying his freedom in the forest. Unfortunately, man has traded his state of autonomy with the modern condition characterised by inequality, dependence, violence and death in the hands of his fellow man. Of course this loss of freedom was not entirely an act of foolishness. Man actually gained a lot of other things as though to compensate for his loss of freedom. He learned to raise family, discovered the making and use of tools and cultivating the land, among others. But these gains have not compensated for what Rousseau described as “the right of the strongest”, which followed these life-improvements. The right of the strongest is the inequality and social injustice, which became part of man’s everyday life thereafter. It is the search for a return to his lost freedom from oppression that has sent man running from pillar to post, often ending up on the margins of the economy – the informal sector – which itself is the epitome of inequality.

Even as it stands as evidence that man actually lives in the age that promotes “the right of the strongest”, the critical role of the informal sector, as the breeding ground for entrepreneurship and freedom of self-expression, is well documented. A large part of the problems facing the sector is the fact that we neither deeply understand its dynamics nor inner workings. This lack of deep knowledge is not limited to the rest of us. The operators themselves hardly fully appreciate what they are up against. The more we understand the sector and its challenges, which are dynamic, the better for the economy in general and the operators in particular.

The informal sector is home for the strong and desperate. It is the platform for budding entrepreneurs to free-wheel and experiment until they find their place in the sun. A place in the sun is a measure of freedom and independence. It is the fulfilment of the long search of man to return to his free nature. Very often, and more by accident rather than design, many people have found themselves becoming role models in some informal sector activities about which they previously had little or no knowledge. The sector is therefore both a training ground and an arena for the practice of economic independence. Small and Medium Enterprises (SMEs) may have the informal sector as their home and breeding ground but some certain forces drive them to it – entrepreneurial spirit, wars, bad government boundary disputes. Owing to the nature of the operators in the sector, particularly the micro and small enterprises, the informal sector is usually the hardest hit in times of economic crisis and bad government. The economically oppressed and displaced take refuge in the sector.

Indeed, the informal sector is neither properly understood nor fully dimensioned by the authorities. Essentially, it is like a blind spot on the economic radar. Perhaps, it is important to recast some of its key features. The informal sector lacks appropriate legal frame work. There is a very thin line between legality and illegality here and operators seem to enjoy it. Activities often start off as downright illegal undertakings – no registration no rule observance. Complying with legislation is the exception rather than the rule.

The informal sector is home for the forceful, boisterous and energetic youth of the country. Since convention is stronger than legislation in this sector, lovers of independence and those driven by the desire for self-employment find fulfilment of their dreams. The freedom from hard and fast rules of the formal sector is an added tonic to zealotry to the stated objectives of individuals.

But there is even more to the informal sector. It is the often faster growing and larger component of some economies, compared to the formal sector, including Nigeria’s. This rapid growth is mostly driven by events outside than inside the sector. For one, the misfortunes of the formal sector, epitomized by its uncanny ability to shed its members at the slightest threat of difficulty, spurs and feeds the growth of the informal sector. But it is not only difficulties in the formal sector that balloons the informal sector. Certain types of progress in the formal sector also do; technological progress, which enhances productive efficiency, often leads to job losses that boost the informal sector. It is that part of the economy where might is right and right is often not what it seems. Members of the sector have little or no title to land or bankable assets. Infrastructure and common services are lacking. In essence, the informal sector is the domain of all those persons structured out of the mainstream to the periphery of the national economy.

The implication of the foregoing is that survival is the key word in the sector. Given that the members are not famous for their obedience of laws and regulations, a winner-takes-all mentality pervades the entire informal sector. Its activities are also often in conflict with public policy, driving in opposite direction with monetary control mechanisms and confusing rooky policy designers.

For us to address the challenges facing the SME sector, we must begin by grasping the nature of its operational milieu. The key thing is to know that their work environment is very dynamic and complicated. Therefore what we consider the most important challenge to them today may cease to be relevant tomorrow. No one could have predicted that before the end of 2016, something more devastating than high interest rates would emerge to threaten the entire SME sector. Of course, the new exchange rate regime had more far-reaching implications than any interest rates. This policy, for a brief period, actually practically destroyed most SMEs. They could neither buy nor sale. Accordingly, being able to track the dynamics of the challenges of the sector is an important step in the deployment of the right solutions.

Many factors continue to make the informal sector an attractive option for displaced Nigerians. The enclave economy of the petroleum sector has ensured that decades of massive oil revenue have happened behind most Nigerians, even as they watched the financial flows with their eyes wide open. The nature of oil industry contracts and investments, coupled with the shallow pockets of Nigerian banks, has robbed the citizens of any meaningful participation in the oil economy, beyond swimming in knee-high oil spillages. The degradation caused by decades of oil spillages (not minding what caused them) and the apparent conspiracy of the elite and government to pay lip service to equity and development of the oil-bearing communities, has ended the private fishing enterprise of many and ejected them from meaningful economic activity. The bad situation is worsened by the collapse of oil prices, which has further complicated the poverty situation, as more people lose jobs.

Today, we seem to have entrepreneurship training going on in Nigeria than there is opportunity to become a successful entrepreneur. Many institutions, formal and informal, continue to train young people to become entrepreneurs, as a means not only of achieving economic independence but also to promote the national economic growth. Recent developments, especially in the foreign exchange market, have warranted a paradigm shift in our economic management strategy. As we promote entrepreneurship and economic independence of our youth, we should also think more seriously about the economic independence of the country. The foreign exchange crisis has shown conclusively that lawyers were right in “nemo dat quod non habet”, meaning you cannot give what you don’t have. Economic independence of individuals in a sorely dependent economy leaves many questions unanswered.

Emeka Osuji