Informal Sector’s Structural and Demographic Fundamentals against the Efficacy of Monetary Policy in Nigeria

Abstract

The informal sector is globally significant because it accounts for much of the job placements, especially in the developing economies. About 99 per cent of the 37million enterprises in Nigeria are microenterprises, most of which are financially excluded. This study examined the structural and demographic features of Nigeria’s MSMEs, from the stand point of the efficacy of monetary policy. The study employed survey research design using structured questionnaire administered on 282 microenterprises in Lagos. The results indicated that the MSME sector suffers significantly from limited access to finance and banking services. Operators in the sector placed little or no reliance on commercial banks for both start-up and additional working capital. They, therefore, operated largely outside the banking system thereby acting, at best, as passive observers of government’s monetary policy actions. The study recommended the vigorous pursuit of financial inclusion, as a strategy for enhanced monetary policy effectiveness.