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Rising rate of unemployment in the face of various policies and programmes by the successive Nigeria government prompted the researcher to evaluate the contributions of the once neglected informal sector of the economy

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  1. 1. 1INFORMAL SECTOR AND EMPLOYMENT GENERATION INKWARA STATE: EMPIRICAL ANALYSIS OF TRANSPORT SECTORBYSHERIF OLAWALE JOLAYEMI09-27-EC-050BEING A RESEARCH PROJECT SUBMITTED TO THEDEPARTMENT OF ECONOMICS,COLLEGE OF HUMANITIES,MANAGEMENT AND SOCIAL SCIENCE, KWARA STATEUNIVERSITY, MALETE, ILORIN, NIGERIA.IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THEAWARD OF BACHELOR OF SCIENCE (B. SC) DEGREE INECONOMICS.PROJECT SUPERVISOR: PROF. LANSANA KEITAMAY, 2013.
  2. 2. 2ABSTRACTRising rate of unemployment in the face of various policies and programmes bythe successive Nigeria government prompted the researcher to evaluate thecontributions of the once neglected informal sector of the economy. The studywas therefore carried out to provide an insight into the informal transport sub-sector‟s contributions to employment generation in Kwara state in which a totalnumber of 100 operators in the sector were randomly selected andquestionnaires were used in obtaining the relevant data. The data collected wereanalyzed by the use of simple regression analysis and descriptive statistics. Thefindings show that investment and wages moves in the same direction withlabour demand, while profit exhibits an inverse relationship with labour demandin the informal sector. Based on the foregoing, the study shows that informalsector activities have contributed to employment generation in kwara state,hence, recommends that government must put in place measure, policies andprogrammes that will enhance the growth of the sector which in turn willgenerate relatively adequate income for the operators so as to enable them liveabove the poverty line.INTRODUCTION1.1 BACKGROUND TO THE STUDYNigeria has the largest informal sector in Africa, a predominance thatstems from its massive population of 160 million, and decades of pooreconomic performance denoted by a high unemployment rate of 12.9% andsoaring poverty incidence of up to 54% (CBN, 2009: xxxvii).The informal sector encompasses largely unrecognized, unrecorded andunregulated small-scale activities. It includes small enterprises with hired
  3. 3. 3workers or household enterprises using family labour and the self- employed.Production processes characteristically rely on high levels of working capital asagainst fixed capital. Formal contracts between employers and employees orbetween buyers and sellers are rare and the often invisible activities involvedusually fall below or outside the fiscal net (CBN, 2001).The informal sector is generally becoming significant especially indeveloping countries such as Nigeria, and therefore plays an important role inemployment generation, production, income generation and improvement in thestandard of living. In most countries, the informal sector absorbs the highgrowing labour force both in the urban and rural areas. As it can be seen,informal sector activities are the necessary tools in most of the countries thathave no social safety nets such as unemployment insurance or even wherewages and pension are very low especially in the formal sector.The extent of the contribution of the sector has not been exhaustivelyinvestigated as it covers a range of economic activities in the Nigerianeconomy. This study would attempt to evaluate the contribution of the informalsector on how it generates employment opportunities which affect the standardof living in turn affects economic performance and specifically, transport sub-sector enterprise activities in Ilorin Nigeria Metropolis.Recently, under the new political dispensation, many states of thefederation have embarked on various programmes aimed at reducingunemployment. Examples of such programmes includes the following: OSUNSTATE YOUTHS EMPOWERMENT STRATEGY (OYES), KWARABRIDGE EMPLOYMENT SCHEEME (KWABES) among others. TheKWABES was to employ two thousand unemployed graduates into the statecivil service and to train others on different vocational skills.
  4. 4. 4Many researchers have studied the employment generation of theinformal sector in Nigeria, such as Adeniji 1983; Ogunsanya and Galtima,1993; Adesanya, 1996; Adeyemo, 1998; Ojekunle; 1998; and Ogunrinola, 2011,do not thoroughly examine the core determinants of earnings amongcommercial motorcycle operators. Arosanyin, 2010 attempted to bridge this gapby examining the determinants of earnings among commercial motorcyclist inIlorin using an adapted Mincerian equation (Ogunrinola, 1991; Folawewo,2006); not much study is known to have been carried out on the income andemployment generation as well as the poverty reduction implications ofcommercial motorcycle taxi (popularly called „okada‟) operations. However,Olufayo (2006) in this direction attends more to the issue of safety oncommercial motorcycle taxis.Recently, there seem to be a general belief among scholars and policymakers in Nigeria, particularly in kwara state, that the development andpromotion informal sector will go a long way in providing solution to the risingunemployment. Hence, there is the need to evaluate the potential level of thisinformal motorcycle transport mode has contributed to income, employmentgeneration and poverty reduction in selected states Kwara state precisely IlorinNigeria Metropolis.1.3 OBJECTIVE OF THE STUDYThe objective of this study is to critically evaluate and examine thecontribution of the informal transport sub-sector activities to employmentgeneration. However, in order to achieve this main goal some specificobjectives are also aimed at in this study. These objectives as follows Examine the potential of informal sector activities on employmentgeneration in Kwara state.
  5. 5. 5 Examine the percentage of the informal sector to economic growth inNigeria. Identify the challenges facing the informal sector in Kwara state.1.4 SCOPE OF THE STUDYThe study focuses attention on the informal sector specificallycommercial motorcycle in kwara state. The enterprises that were classified aspart of the informal sector are shoe marker/repairers, furniture makers,automobiles mechanics, weaving, leather works, pottery, brass work, wood andmetal carving, food vendors, hairdressers, barbers, commercial motorcyclists,taxi and bus drivers etc. while commercial motorcyclists are selectedFurthermore, the study shall be restricted to the informal transport sub-sector in llorin metropolis. The choice of the study area was based on the factthat the population within the area is over one- third (1/3) of the kwara statepopulation (census, 2006)1.5 STATEMENT OF THE HYPOTHESISFor the purposes of the study, two hypotheses will be tested. Thehypotheses are stated as follows:H0: there is no positive relationship between the informal sector activities andemployment generation as againstH1: that there exist a positive relationship between the informal sector andemployment generation.2.0 INTRODUCTIONThis chapter concerns itself mainly with examining of the availableliteratures on the activities of the informal sector. To this end, the study looks atthe conceptual framework of the informal sector historically, the various
  6. 6. 6definitions given by different authors, policy makers, financial institutions,economic thinkers as well as from the classical and modern economists. Factorsthat led to the existence of the informal sector was also considered, theories ofthe informal sector as we as the characteristics and contributions or role playedby the informal sector under different approaches was also examined critically.2.1 CONCEPTUAL FRAMEWORKNo economy today is free from the activities of the informal sector, eventhe so called developed economics of the world have certain percentage of theireconomies operating under the informal sector. This is largely as a result ofgovernment inability to allocate and distribute resources to the citizens as wasobtained during the socialist days.The campaign to metamorphose the world economy to capitalist was anattempt to encourage the informal sector activities as government will now bedoing less in terms of economic performance, thereby allowing the marketforces to regulate the economy. The informal economic activity is that whichgoes unregulated in an otherwise regulated system. The informal economies areas old as their formal counterpart. It should however be noted that the term itselfis much more recent. The optimism of modernization theory school ofdevelopment has led most people in the 1950s and 60s to believe that thetraditional forms of work and production would disappear as a result ofeconomic progress in developing countries. As this proved unfounded, scholarsturned to study more closely what was called the traditional sector. The foundthat sector had not only persisted, in fact expanded to encompass newdevelopment. In accepting that these forms of production were there to stayscholars have started using the term „‟ informal sector‟‟, which was first used bythe British anthropologist, Keith Hart, in a study on Ghana in 1911 and taken upthe international labour office (ILO) in a widely read study on Kenya in 1972.
  7. 7. 7Since then the informal sector has become an increasingly popular subjectof investigation. Not only in economic but also in sociology and anthropology.With the turn toward so called modes of production in the advanced developedcountries, many workers were forced out of their formal sector work andconsequently into informal employment. In a seminar collection articles, theinformal economy studies in advanced and less developed countries, Alejandroportes and collaborators emphasized on the existence of an informal economy inall countries by including case studies ranging from new York and Madrid toUruguay and Colombia.Arguably the most influential book on the informal economy is Hernandodesoto’s el otro seuden (1986), with a preface by Peruvian and other LatinAmerican economies force a large part of the economy into informality and thusprevent economic development while accusing the ruling class of 20, centurymercantilism, Desoto admire the entrepreneurial spirit of the informal economy.In a widely cited experiment, his team tried to legally register a small garmentfactory in Lima. This took more than 100 administrative steps and almost ayear of full-time work. Whereas Desoto‟s work is popular with policy makersand champion of free market policies like Economist‟ s and many scholar of theinformal economy have criticized it for the both methodology flaws andnormative bias.The informal sector is the highly heterogeneous, encompassingproduction units of different feature and in a wide range of economic activities,as well as people ( i.e. works, producers, employers) working or producingunder many different types workers, of employment relation and productionarrangement (Jacques charms, 1998).
  8. 8. 8The heterogeneity nature of information sector and its multipledimensions made it difficult to have a clear – cut conceptual and statisticaldefinitions.During the 1970s and 80s, the informal sector was widely defined asunregulated economic enterprises or activities (Hart, 1973). In 1993, theinternational conference of labour statisticians, (ICLS) adopted an internationalstatistical definition of the informal sector so defined: namely, all unregistered(or unincorporated) enterprises below a certain size, including; (a) Micro –enterprises owned by informal employers who hire one or more employee on acounting basis; and (b) own – account operations owned by individuals whomay employ contributing family workers on an occasional basis.In so doing, the 1993 ICLS noted that an enterprises based definitionwould not capture all dimensions of informal employment. It also recommendedthat further work was needed on the employment based dimensions ofinformality. Since 1997, when they were both founded, the international expertgroup on informal sector statistics (called the Delhi group because thegovernment of India is its convener). And the global policy research networkwomen in informal employment: Globalizing and Organizing (WIEGO) haveworked closely with the Bureau of statistics of the international Labour office(ILO) to develop and promote an „‟Employment based‟‟ definition of theinformal economy that would capture all dimension of informal employment i.e.all employment that is not regulated or protected – both inside and outsideinformal enterprises.In pushing for this expanded employment – based definition of theinformal economy, the ILO bureau of statistics, the Delhi groups, and theWIEGO network sought to incorporate the whole informality – including bothenterprises and employment relation - as manifested in industrialized and
  9. 9. 9developing economies. As such this expanded definition helps to capture thereal world dynamics in labour market today – particularly the less visiblesegment of the force which the working poor, especially women are oftenengaged.2.2.2 THE STRUCTURALIST SCHOOLThis school, popularized by Caroline Moser and Alenxandro Portes inlate 1970s and 80s, set a models based mostly on post Keynesian economicanalysis and subscribes to the notion that the informal sector should be seen assubordinated economic unit (micro-firm) and workers that serve to reduce inputand labour costs.2.2.3 THE LEGALIST SCHOOLAs popularized by Hernando Desoto in the 1980s 1990s, subscribes to thenotion that micro-entrepreneurs choose to operate informally in order to avoidthe costs, time, and effort of formal registration (Desoto, 1989).2.2.4 THE ILLEGALIST SCHOOLPopularized by neo-classical and neo-liberal economists across thedecades subscribe to the notion that informal entrepreneurs deliberately seek toavoid regulations and taxation and in some cases, to deal with illegal goods andservices.2.3 THEORETICAL FRAMEWORKThe advocate of capitalist is the bedrock of the informal sector activitiesin the developing countries. This is because of the shift from socialist tocapitalist economy which in turn in mass unemployment, underemployment andpoverty. One may wonder that despite the argument of the proponents of the
  10. 10. 10capitalist school that the market forces will always bring about equilibrium, whyagain do we still experienced unemployment and all other economic challenges.Theoretical model which attempted explain these processes and theirconsequences for developing countries urbanization and occupation havechanged considerably over the last two decade.2.3.1 THE WORLD SYSTEM APPROACH2.3.2 THE MODERNIZATION THEORY2.3.3 THE NEO-LIBERAL APPROACH2.4 ROLE OF THE INFORMAL SECTOR IN THE ECONOMYNevertheless, it is obvious that the informal sector have received little orno attention by the government through its policy makers, the role of the sectorin solving the problems of many people socially and economically cannot beoverlook.The main roles of this sector are employment generation and GDP (grossdomestic product).EMPLOYMENT GENERATION: the increased in the growth rate of informalsector activities can be traced directly to the ineffective and inefficientperformance of other sectors of the economy such as (manufacturing,agriculture, mines and steel, industry services etc) to provide employment andincome for the ever increasing labour force. Even with the high rate of rural-urban migration, the informal sector will cater for these migrants in no smallamounts and this is because the aim of the migration is to be gainfully employedin the urban areas but unfortunately. The “labour sponge hypothesis” of theninformal sector has consistently been upheld in virtually all economiescharacterized by serious labour market equilibrium (Joan Venek, 2004). TheNigerian economy is a good example of where informal activities is thriving on
  11. 11. 11a daily basis and this is largely due to the fact that the policy makers, havingrecognized the fact that the sector could only adsorb a small proportion of theever increasing labour force, embarked on a number of polices towardsachieving self reliance and small and medium scale enterprises development.GROSS DOMESTIC PRODUCT (GDP): informal sector has its crucial rolethat its plays on a nation gross domestic product (GDP) specially developingcountries like Nigeria. The data below that comprises of the informal sector andgross domestics product from the 1970-2010 we be analysis to show howpotential the informal sector in Nigeria has contribute to its gross domesticproductTable above also show that the informal sector constitutes a very largeproportion of the economy and contributes significantly to employment and thegrowth of gross domestic product in Nigeria.For over three decades, the informal sector in Nigeria has been anexpanding source of employment especially for a large number of literate andnon-literate populations who are unable to access employment in the formalsector. The informal sector, which has wide range of economic activities,05,000,00010,000,00015,000,00020,000,00025,000,00030,000,0001970 1975 1980 1985 1990 1995 2000 2005 2010YEARS GDP INFORMAL SECTOR
  12. 12. 12operates below officialdom and outside the ambient of public institutions andregulations2.5 EMPIRICAL FRAMEWORK2.5.1 URBAN INFORMAL SECTORInformal economy cab no longer be ignored and this is because it formsas large part of the economy of many economies and comprises 42% of valueadded in Africa, 41% in Latin America and 3% in the transition economies ofEurope and the former Soviet union.It is estimated that informal employment account for 54% of women‟semployment sub-Saharan Africa (Herald 2012). The proportion of informalsector employment to the total urban employment is highest in Africa followedby Asia, Latin America and the Caribbean. Estimates in some south east andsouth Asian cities put the share of informal employment to the total workforceat around 50 to 60% (Rukmana, 2007). The contribution of the informal sectorto employment generation in leading urban centres in selected African countriesmid 1970s ranging from 95% in urban areas in the Republic of Benin to 20% inDjibouti, with Kumasi (Ghana and Lagos (Nigeria) having 65 and 50%respectively (ILO, 1985). However, in the opinion of onyenechere (2003), theimportance of the informal sector lies in its contribution to a nation‟s totaleconomy, while to UNECA/AAPAM (1992) it lies most in the aspect oftraining opportunities it provides through apprenticeship. (Kabir 2012),confirms that Motor Cyclist in Northern Nigeria are high labour intensive anddominated by small size operators in terms of number of people employedcompared with other formal sectors of the economy. In general, employmentsize between 1-9 people was dominant.
  13. 13. 13“Fasanya and Onakoya 2010” show that informal sector activities havesignificant impact on absorbing the large pool of labour force in Nigeria. Thestudy contends that human capital formation is positively related tounemployment rate which reflects the dearth of government expenditure oneducation in the country. Therefore, there is an urgent need for the governmentto re-examine its policies on informal sector. While (Mike 2012) Empiricalsurvey evidence showed that the bulk of the new entrants to the urban labourforce seem to create their own employment and income by engaging in theproduction and distribution of goods and services in the informal sector. Alsothe study shows that there have been some shifts in the educational compositionof the labour force in the informal sector. Therefore, there is need for a wellarticulated official policy as an integral part of a national policy on employmentand an incentive scheme for the informal sector. Adesanya (1998) examined theusers and operators characteristics of motorcycle as public transport in Ibadan,Nigeria. About 91.9 percent of the operators fell between 21 and 40 years. Theoperators who had not more than secondary education were about 59 per cent.About 84% of the operators had a previous job, most of whom were retrenchedworkers and artisans. Also 53.3 percent work on full time basis. The hours ofoperation are between 9 and 14 hours a day, with about 63.9% operatorsworking six days a week. It further shows that 77 percent of the operators areowner-drivers while 23 percent of them were hired drivers. About 92 percent ofthe motorcycles were purchased through full payment while about 6 percentused hire-purchase. There is no indication of the source of the fund for thepurchase.In a nutshell, the fact that most African cities are defaced by activities ofsome informal sector operators and the fact that the informal sector employsbetween 40 and 60% of labour force and contributes betweens a quarter and a
  14. 14. 14third incomes in most African countries (ILO, 1985) is a manifestation of thesignificance of the informal sector in African.2.6 SUMMARYAttempt had been made to review the available literature on the informalsector in which we start from conceptualizing of the term “informal sector”, thedefinition of the term in real situation, the theoretical framework as well as theavailable empirical studies.From the conceptual views, it is known that no economy today wasescaped from the activities of the informal sector not even the so calleddeveloped economy. It also became more obvious that capitalism and informalsector work hand in hand. In defining the concept, the definitions put forwardby ICLS and by most informal sector surveys concentrate more on theproduction unit or enterprise as the unit of measurement or analysis instead ofthe worker or job as the unit of analysis.The available theories and models of the informal sector though helps indescribing what was happening the sector and in particular drawing attention tothe features and characteristics of these models, however were unable to provideadequate explanations for the reasons for continuous growth of the sector.While trying to provide explanations, they focused more on the secondaryfactors such as rapid population growth, downsizing of the public sector etc.While neglecting the failure of the state to distribute and allocate resourcesefficiently.In a broader sense, the summary of the available literature on informalsector can be divided into two; traditional and modern view of the informaleconomy,
  15. 15. 15From the traditional point of view, the informal sector is that sector of theeconomy that only produced marginally. It exists in isolation of the formaleconomy and it represents a reserve pool of surplus labour. Most operators inthe sector source for funds on their own through friends and relatives with littleor no skills and training. This clearly shows that such business will die a naturaldeath with the modern industrial growth as argued by Todaro. Furthermore,according to the traditional view, most of those in the sector are entrepreneurswho operate illegal or unregistered enterprises in order to avoid regulation andtaxation. Lastly, it is comprised mostly of hawkers, street traders, small shopowners, and very small scale producers” mainly local farmers.3.0 IntroductionThe objective of this chapter is to examine the various methods used oremployed in the collection and the analysis of the relevant data in the course ofcarrying out this research work. In an attempt to achieve this objective emphasiswas laid on the population of the study, the sampling technique, the type ofdata, the model and its simplification as well as method employed in theanalysis of the data collected3.1 THE POPULATION OF THE STUDYThis research study focuses on the enterprises that fall under the purviewof informal economic activities and this led to the selection of transport sub-sector(buses, taxi, motorcyclist, shuttle) in specific the capital of Kwara stateIlorin metropolis in which the sample are to be selected. According to 2006census shows that population within this city (Ilorin metropolis) represent over
  16. 16. 16one third of kwara state population. A total number of 100 questionnaires are tobe distributed to the enterprise mentioned above earlier for the purpose ofadministration.3.3 NATURE AND INSTRUMENT OF DATA COLLECTIONThe major sources of data for this research were primary and secondarysources which were obtained from Central Bank of Nigeria (CBN),International Labour Organization (ILO), and World Bank etcThe primary data in nature with the use of questionnaire as the maininstrument used in getting information needed for the research analysis.3.4 METHOD OF DATA ANALYSISThe research design to be employed in this study was descriptive andanalytical in nature. This is because, according to (Rubin & Babbie 1986),descriptive statistics is used in research for the purpose of bringing the data in toorder i.e. data presentation, tabulation and summation.3.5 MODEL SPECIFICATIONIn modelling employment generation and informal sector (transport sub-sector) activities Harris-Todaro surplus labour model is adopted. Many effortswere made to model the predicted outcome of the Harris – Todaro theory ofsurplus labour demand. The models can be useful applications in the analysis ofproductivity, earnings and employment determination (Wadhwani and Wall(1991), Abiodun, (2004, 2006) Kabir (2009), Teal (1995, 1997), Riveros andBouton (1991). Thus the empirical specifications of this model are drawnmostly from Abiodun (2006) and kabir (2009). A labour demand function whereemployment is determined by wage rate and cost of capital is specified asLd= αw + βrK..................................................................... (1)
  17. 17. 17Where,Ld= labour demandW = wage rate (earnings)rK = Return to capitalHowever, given the informal nature of the activities of firms beinginvestigated, rK is proxies by three different factors: cost of capital/borrowing,level of investment (size of firm) and profit level. The replacement of rK bythese variables can be explained in two ways.First, in the informal sector, firm do not have access to formal creditmarket, where official interest rate is charged on borrowings; rather they oftenresort to the informal financial market where it is usually difficult to keeprecord of charges on loans.Second, the higher the informal cost of borrowing (capital) the lower willbe the opportunity to borrow/invest and this will in turn affect the level ofprofit. Ultimately, this will affect productivity and employment.The estimable labour demand function can be written as;Ld= α0 + β1w + β2I + β1pr + u............................................................... (2)Where:W = Wage rateI = InvestmentPR = ProfitU = Random Term
  18. 18. 18β1- β2 = the estimation parametersGiven the cross sectional nature of the data, in order to eliminate anyeffect of Oscillations that may result in heaters elasticity and ensure constantvariation a cross the series equation (2) is expressed in simple log form as;Log Ld= α0 + β1logw + β2logI + β3logpr +u............................................ (3)Basically the a priori expectation for this research is that, there exist adirect positive relationship between employment generation and informal sectoractivities.To estimate the model, simple regression analysis is to be used in order toreflect the explanatory natures of the variables. In order to verify the validity ofthe model, two major evaluation criteria are used.(i) The a priori expectation criteria which is based on the signs and magnitudeof the coefficients of the variables under investigation(ii) Statistical criteria which is based on the statistical theory which in orderwords is referred to as the first order least square (OLS), consisting of R-square(R2), F-statistics and t-test. The R2is concerned with the overall explanatorypower of the regression analysis and the t-test is used to test the significantcontribution of each of the independent variable (Gujarati 2004).3.6 VARIABLE MEASUREMENTThe relevant variables of the model are measure as follows. The numberof the employee in each firm is used as a proxy for labour demand by the firmrepresented as Ldin the equation; wage is measure by average earnings peremployees generation from the activities of the informal transport sector.Investment is measured as the total amount of capital invested by the firm in thebusiness at a particular period
  19. 19. 194.0 INTRODUCTIONThis chapter deals mainly with the presentation and analysis of data inwhich descriptive statistics method was used for the socio-economic variablesand the ordinary least square regression was for the model.A total number of 100 questionnaires were administered in which theresearcher was able to collect 89 as 11 were returned either unfilled or not filledcorrectly.Therefore, the results are interpreted and discussed in this chapter.From the above table, (1) shows that 100% of the operators in theinformal transport sub sector are men. This however, is not surprising becauseof the culture background and religious belief of the people of northern Nigeriain which kwara state belongs which doesn‟t support women to operate suchbusiness. Hence, it shows that the informal transport sub-sector is exclusivelyfor men.(2) Shows that 23.5% of the operators are within the neighbourhood of18-30% years, 33.7% are between 31-45 years, and 46-60 also have also have30.3% while the remaining 12.4% goes to 61year above. The relatively highpercentage in the age group of 18-30 is a manifestation of the fact that majorityof people in this age bracket are in active period with secondary school or underapprenticeship training. Furthermore, the 33.7% of 31-45 shows that the sectorsbecoming increasingly attractive to the youths who form the large proportion ofunemployment in Nigeria. The 12.4% for 61year above shows that the sub-sector is not meant for old age as many of them have retired from active service.(3) Shows that about 11.2% have no formal education reason because thisform of business does not requires any kind of formal education, 33.7% of the
  20. 20. 20respondents attended primary school, about 39.3% attended secondary school,while 15.7% attended tertiary institutions. This shows that majority of theoperators have little or no formal education would go a long way to enableoperators in the sector to make use of modern technological inputs, improvetheir customer relations also adopts more modern effective changes.(4) Clearly indicate that 40.4% of the operators were financed by thegovernment, which is not strange as a kwara state government is embarking onyouths empowerment programme with the objective of poverty reduction andemployment generation through granting of soft loans to the youths. The 38%that goes for personal savings was not also by accident, but by the determinationof these unemployed youths and in turn become employer of labour. The 8.9%that falls under loans from private organisation was not also a shock as it wasdifficult to obtain loan from these organisations.(5) Shows that about 55.1% of the operators have access to loan while theremaining 44.9% have no access. This buttressed what we have showed earlierabout the state government towards youths employment as further investigationreveals that about 50% of the loan were provided by the government, whilemicro-finance have 15%. The implication of this the micro-finance banks havemore to do to encourage more youths in the sector.(6) Shows that 58.4% of the informal transport sub-sector operators haveemployee/ apprentice undergoing training/ working respectively. The remaining41.6% is understandable because of the nature of the work as some of them areworking on their own, while others have graduated their apprentices to becomeself employed on their own.(7) Made it crystal clear that 86.5% of the operators pay tax to thegovernment. Though some of them refused to disclose the actual amount paid tothis researcher as they claimed they have no structured tax. Invariably, one way
  21. 21. 21or the other, the operators of the sector contributes in no small measure togovernment revenue.About 13.5% of the respondent claimed not paying any amount to the taxauthority, just as they explained that they have their own way of avoiding thetax authority (tax avoidance).(8) About 84.3% of the operators feel the impact of government policy ontheir business, while the remaining 15.7% are indifferent to government policy.However, further interactions with the operators reveal that a large proportion ofthe operators felt the impact of government policy negatively with thederegulation policy as the chief of all policies affecting their business.(9) lastly, the income distribution shows that about 28.9% of theoperators/workers generate income between 5,000-10,000 monthly. This showsthat the operators are living a little bit above poverty line, though the peanutscannot sustain them to have a good living standard. Also, about25.8% of theoperators generates income between 11,000-20,000 monthly, and this isrelatively above the benchmark of poverty line, while 37.1% received income of21,000-40,000 monthly. Only about 12.4% generated income of 41,000 aboveand this is an indication that much needs to be done to stimulate the business soas to improve their income level.It should be noted here that according to the united nation (UN), thepoverty benchmark per day is $2 U.S dollar. This is equivalent to N312.In the course of interacting with the operators in the sector, the researcherfound it challenging to have a clear picture of the major challenge facing theoperators in the business. However, many of them have similar challenges someof which are, deregulation of the downstream sector of the oil and gas industry,
  22. 22. 22police extortion, multiple taxes, bad roads and security agent harassment amongothers4.2 REGRESSION RESULTS.Dependent Variable: LOG(LABOURDEMAND)Method: Least SquaresDate: 04/15/13 Time: 19:10Sample: 1 89Included observations: 89Variable Coefficient Std. Error t-Statistic Prob.LOG(PROFIT) -0.043506 0.041993 -1.036021 0.3031LOG(WAGE) 0.443953 0.052917 8.389594 0.0000LOG(INVESTMENT) 0.195269 0.059281 3.293928 0.0014C -5.323416 0.697072 -7.636827 0.0000R-squared 0.632047 Mean dependent var 0.454513Adjusted R-squared 0.619060 S.D. dependent var 0.495260S.E. of regression 0.305676 Akaike info criterion 0.511320Sum squared resid 7.942214 Schwarz criterion 0.623169Log likelihood -18.75376 F-statistic 48.66926Durbin-Watson stat 1.780619 Prob(F-statistic) 0.000000From the regression result, shows the negative constant shows that allthings being equal, without considering the three independent variables in themodel, labour demand will be decreasing in the informal sector byapproximately 5% every year.This is understandable as this sector depends largely on all thesevariables. The result also shows that there is a positive direct relationshipbetween labour demand and wage and investment as they both have the
  23. 23. 23expected signs and conform to the a priori. By implication, it means thatincrease in the wage level and investment will lead to increase in labourdemand. Also, both investment and wage are significant at 5%.From the result, mean labour demand went up by 0.443953% for a nairaincrease in wage. In other word, 0.44% increase in labour demand will beaccounted for by a naira increase in wage. On the other hand, holding otherexogenous variables constant (wage and profit), a 1% increase investment led toan average 0.195% increase in labour demand and the coefficient is statisticallysignificant.Labour demand has an overall negative relationship with profit -0.043506. This means that an increase in the profit rate will discourage labourdemand which is contrary to the theoretical issues, because in theory an increasein profit is expected to accompanied with expansion in business and by businessexpansion more labour is expected to be employed but because of the nature ofthis informal transport sub-sector business increase in profit will discourageemployment of more labour, due to the fact that this business are mostly oneman or family business were they don‟t need to employ or hired more laboureven if there is an increase in profit. The negative relationship between labourdemand and profit can be explained by the fact the business is mostly informaland owners are likely to bring in their relatives into the business, rather thanhire more labour from the labour market. Generally the results show that profitis not important in the determination of labour employment in this sector,because of the informality nature of business.From the result, the coefficient of profit -0.043506 tell us that, with theinfluence of other exogenous variables held constant as profit rate increases by anaira on the average, labour demand goes down by 0.04%.
  24. 24. 24The R2which is the coefficient of multiple determinations 0.632047shows the good fit of the model. In other words, it exhibits a good fit and has astrong predictive power. By implication, it shows that about 63% variation inlabour demand is explained by the variables captured in the model while theremaining 37% is catered for by the error term which are those variables thatcannot be captured in the model.The t-statistics which is used to test the individual significant of theexogenous variable shows that all the variables are significant at 5% level ofsignificant.The F-statistics which is used to test the overall significance of thevariables in the model is also significant with 0.000000 probability.Using probability, constant, wage is significant at 1%, investment issignificant at 5% except profit which is not significant either at 1% and 5%.The Durbin Watson statistic of 1.78 however indicates presence ofautocorrelation in our residuals. Although with the presence of autocorrelationour OLS estimation are no longer efficient, they remain unbiased, consistentand a significantly normally distributed.5.1 INTRODUCTIONThis chapter is the last chapter as well as the concluding part of theresearch work. In the last two chapters, we have presented the model and theresult of the regression equation was computed and hypothesis was tested usingdifferent statistical testing techniques. Therefore, in this chapter we attempted todraw conclusion from the findings of this research. Invariably, this chaptercomprises of the summary of the research work entirely, the conclusion fromthe finding and lastly recommendation are put forward based on the conclusion.5.2 RECOMMENDATION
  25. 25. 25In respect of the empirical findings of this research work, the followingrecommendations are being put forward.1. There is no doubt that informal sector activities have contributed toemployment generation in kwara state, based on the finding, hence,government must put in place measure, policies and programmes that willenhance the growth of the sector which in turn will generate relativelyadequate income for the operators so as to enable them live above thepoverty line.2. The findings also showed that investment moves in the same directionwith labour demand, hence it is recommended that government shouldmake it a law for both commercial and micro-finance banks to set asidecertain percent for small-medium scale enterprises like the informaltransport sub-sector as this will stimulate investment and in turn generatemore employment3. As the sector is contributing to government revenue through payment oftax, government should henceforth check the problem of multiple taxesbeing levied on the operators in the sector. This could be done by makingit public the actual amount that must be paid as tax by each individualoperator. This will go a long way to encourage more workers in thesector.APPENDIXNOTE: FULL MATERIAL ON THIS PROJECT SHOULD CONTACT MEE-MAIL: SHEFT_WALE@YAHOO.COMMOBILE: 08066924755, 08086216037.REFERENCES
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