Informal–formal workers’ transition in Nigeria

Abstract

This study evaluates the effects of the informal sector on Nigerian workers’ livelihoods and analyses workers’ transitions within the informal sector and between informal and formal employment. A binary logit model is applied to General Household Survey panel data for the periods 2010–2011, 2012–2013, and 2015–2016. We find that informal employment has the greatest impact on workers’ livelihoods in terms of earnings. Results also indicate the existence of a high level of dynamic transition of workers within different types of informal employment. Our results further indicate that both self-employed and wage-employed informal workers are likely to transit to formal employment, the likelihood being higher for the upper-tier informal wage-employed. While informally employed workers have a very high chance of transiting to formal employment, formal workers have a much lower chance of transiting to informal employment. The policy implication of our results is the need to create better working conditions for informal workers.