Slideshow

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INFORMAL SECTOR AND EMPLOYMENT GENERATION IN
KWARA STATE: EMPIRICAL ANALYSIS OF TRANSPORT SECTOR
BY
SHERIF OLAWALE JOLAYEMI
09-27-EC-050
BEING A RESEARCH PROJECT SUBMITTED TO THE
DEPARTMENT OF ECONOMICS,COLLEGE OF HUMANITIES,
MANAGEMENT AND SOCIAL SCIENCE, KWARA STATE
UNIVERSITY, MALETE, ILORIN, NIGERIA.
IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE
AWARD OF BACHELOR OF SCIENCE (B. SC) DEGREE IN
ECONOMICS.
PROJECT SUPERVISOR: PROF. LANSANA KEITA
MAY, 2013.

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ABSTRACT
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. The study
was therefore carried out to provide an insight into the informal transport sub-
sector‟s contributions to employment generation in Kwara state in which a total
number of 100 operators in the sector were randomly selected and
questionnaires were used in obtaining the relevant data. The data collected were
analyzed by the use of simple regression analysis and descriptive statistics. The
findings show that investment and wages moves in the same direction with
labour demand, while profit exhibits an inverse relationship with labour demand
in the informal sector. Based on the foregoing, the study shows that informal
sector activities have contributed to employment generation in kwara state,
hence, recommends that government must put in place measure, policies and
programmes that will enhance the growth of the sector which in turn will
generate relatively adequate income for the operators so as to enable them live
above the poverty line.
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Nigeria has the largest informal sector in Africa, a predominance that
stems from its massive population of 160 million, and decades of poor
economic performance denoted by a high unemployment rate of 12.9% and
soaring poverty incidence of up to 54% (CBN, 2009: xxxvii).
The informal sector encompasses largely unrecognized, unrecorded and
unregulated small-scale activities. It includes small enterprises with hired

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workers or household enterprises using family labour and the self- employed.
Production processes characteristically rely on high levels of working capital as
against fixed capital. Formal contracts between employers and employees or
between buyers and sellers are rare and the often invisible activities involved
usually fall below or outside the fiscal net (CBN, 2001).
The informal sector is generally becoming significant especially in
developing countries such as Nigeria, and therefore plays an important role in
employment generation, production, income generation and improvement in the
standard of living. In most countries, the informal sector absorbs the high
growing 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 that
have no social safety nets such as unemployment insurance or even where
wages and pension are very low especially in the formal sector.
The extent of the contribution of the sector has not been exhaustively
investigated as it covers a range of economic activities in the Nigerian
economy. This study would attempt to evaluate the contribution of the informal
sector on how it generates employment opportunities which affect the standard
of 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 the
federation have embarked on various programmes aimed at reducing
unemployment. Examples of such programmes includes the following: OSUN
STATE YOUTHS EMPOWERMENT STRATEGY (OYES), KWARA
BRIDGE EMPLOYMENT SCHEEME (KWABES) among others. The
KWABES was to employ two thousand unemployed graduates into the state
civil service and to train others on different vocational skills.

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Many researchers have studied the employment generation of the
informal 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 among
commercial motorcycle operators. Arosanyin, 2010 attempted to bridge this gap
by examining the determinants of earnings among commercial motorcyclist in
Ilorin using an adapted Mincerian equation (Ogunrinola, 1991; Folawewo,
2006); not much study is known to have been carried out on the income and
employment generation as well as the poverty reduction implications of
commercial motorcycle taxi (popularly called „okada‟) operations. However,
Olufayo (2006) in this direction attends more to the issue of safety on
commercial motorcycle taxis.
Recently, there seem to be a general belief among scholars and policy
makers in Nigeria, particularly in kwara state, that the development and
promotion informal sector will go a long way in providing solution to the rising
unemployment. Hence, there is the need to evaluate the potential level of this
informal motorcycle transport mode has contributed to income, employment
generation and poverty reduction in selected states Kwara state precisely Ilorin
Nigeria Metropolis.
1.3 OBJECTIVE OF THE STUDY
The objective of this study is to critically evaluate and examine the
contribution of the informal transport sub-sector activities to employment
generation. However, in order to achieve this main goal some specific
objectives are also aimed at in this study. These objectives as follows
 Examine the potential of informal sector activities on employment
generation in Kwara state.

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 Examine the percentage of the informal sector to economic growth in
Nigeria.
 Identify the challenges facing the informal sector in Kwara state.
1.4 SCOPE OF THE STUDY
The study focuses attention on the informal sector specifically
commercial motorcycle in kwara state. The enterprises that were classified as
part of the informal sector are shoe marker/repairers, furniture makers,
automobiles mechanics, weaving, leather works, pottery, brass work, wood and
metal carving, food vendors, hairdressers, barbers, commercial motorcyclists,
taxi and bus drivers etc. while commercial motorcyclists are selected
Furthermore, the study shall be restricted to the informal transport sub-
sector in llorin metropolis. The choice of the study area was based on the fact
that the population within the area is over one- third (1/3) of the kwara state
population (census, 2006)
1.5 STATEMENT OF THE HYPOTHESIS
For the purposes of the study, two hypotheses will be tested. The
hypotheses are stated as follows:
H0: there is no positive relationship between the informal sector activities and
employment generation as against
H1: that there exist a positive relationship between the informal sector and
employment generation.
2.0 INTRODUCTION
This chapter concerns itself mainly with examining of the available
literatures on the activities of the informal sector. To this end, the study looks at
the conceptual framework of the informal sector historically, the various

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definitions given by different authors, policy makers, financial institutions,
economic thinkers as well as from the classical and modern economists. Factors
that led to the existence of the informal sector was also considered, theories of
the informal sector as we as the characteristics and contributions or role played
by the informal sector under different approaches was also examined critically.
2.1 CONCEPTUAL FRAMEWORK
No economy today is free from the activities of the informal sector, even
the so called developed economics of the world have certain percentage of their
economies operating under the informal sector. This is largely as a result of
government inability to allocate and distribute resources to the citizens as was
obtained during the socialist days.
The campaign to metamorphose the world economy to capitalist was an
attempt to encourage the informal sector activities as government will now be
doing less in terms of economic performance, thereby allowing the market
forces to regulate the economy. The informal economic activity is that which
goes unregulated in an otherwise regulated system. The informal economies are
as old as their formal counterpart. It should however be noted that the term itself
is much more recent. The optimism of modernization theory school of
development has led most people in the 1950s and 60s to believe that the
traditional forms of work and production would disappear as a result of
economic progress in developing countries. As this proved unfounded, scholars
turned to study more closely what was called the traditional sector. The found
that sector had not only persisted, in fact expanded to encompass new
development. In accepting that these forms of production were there to stay
scholars have started using the term „‟ informal sector‟‟, which was first used by
the British anthropologist, Keith Hart, in a study on Ghana in 1911 and taken up
the international labour office (ILO) in a widely read study on Kenya in 1972.

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Since then the informal sector has become an increasingly popular subject
of investigation. Not only in economic but also in sociology and anthropology.
With the turn toward so called modes of production in the advanced developed
countries, many workers were forced out of their formal sector work and
consequently into informal employment. In a seminar collection articles, the
informal economy studies in advanced and less developed countries, Alejandro
portes and collaborators emphasized on the existence of an informal economy in
all countries by including case studies ranging from new York and Madrid to
Uruguay and Colombia.
Arguably the most influential book on the informal economy is Hernando
desoto’s el otro seuden (1986), with a preface by Peruvian and other Latin
American economies force a large part of the economy into informality and thus
prevent economic development while accusing the ruling class of 20, century
mercantilism, Desoto admire the entrepreneurial spirit of the informal economy.
In a widely cited experiment, his team tried to legally register a small garment
factory in Lima. This took more than 100 administrative steps and almost a
year of full-time work. Whereas Desoto‟s work is popular with policy makers
and champion of free market policies like Economist‟ s and many scholar of the
informal economy have criticized it for the both methodology flaws and
normative bias.
The informal sector is the highly heterogeneous, encompassing
production units of different feature and in a wide range of economic activities,
as well as people ( i.e. works, producers, employers) working or producing
under many different types workers, of employment relation and production
arrangement (Jacques charms, 1998).

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The heterogeneity nature of information sector and its multiple
dimensions made it difficult to have a clear – cut conceptual and statistical
definitions.
During the 1970s and 80s, the informal sector was widely defined as
unregulated economic enterprises or activities (Hart, 1973). In 1993, the
international conference of labour statisticians, (ICLS) adopted an international
statistical 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 a
counting basis; and (b) own – account operations owned by individuals who
may employ contributing family workers on an occasional basis.
In so doing, the 1993 ICLS noted that an enterprises based definition
would not capture all dimensions of informal employment. It also recommended
that further work was needed on the employment based dimensions of
informality. Since 1997, when they were both founded, the international expert
group on informal sector statistics (called the Delhi group because the
government of India is its convener). And the global policy research network
women in informal employment: Globalizing and Organizing (WIEGO) have
worked closely with the Bureau of statistics of the international Labour office
(ILO) to develop and promote an „‟Employment based‟‟ definition of the
informal economy that would capture all dimension of informal employment i.e.
all employment that is not regulated or protected – both inside and outside
informal enterprises.
In pushing for this expanded employment – based definition of the
informal economy, the ILO bureau of statistics, the Delhi groups, and the
WIEGO network sought to incorporate the whole informality – including both
enterprises and employment relation - as manifested in industrialized and

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developing economies. As such this expanded definition helps to capture the
real world dynamics in labour market today – particularly the less visible
segment of the force which the working poor, especially women are often
engaged.
2.2.2 THE STRUCTURALIST SCHOOL
This school, popularized by Caroline Moser and Alenxandro Portes in
late 1970s and 80s, set a models based mostly on post Keynesian economic
analysis and subscribes to the notion that the informal sector should be seen as
subordinated economic unit (micro-firm) and workers that serve to reduce input
and labour costs.
2.2.3 THE LEGALIST SCHOOL
As popularized by Hernando Desoto in the 1980s 1990s, subscribes to the
notion that micro-entrepreneurs choose to operate informally in order to avoid
the costs, time, and effort of formal registration (Desoto, 1989).
2.2.4 THE ILLEGALIST SCHOOL
Popularized by neo-classical and neo-liberal economists across the
decades subscribe to the notion that informal entrepreneurs deliberately seek to
avoid regulations and taxation and in some cases, to deal with illegal goods and
services.
2.3 THEORETICAL FRAMEWORK
The advocate of capitalist is the bedrock of the informal sector activities
in the developing countries. This is because of the shift from socialist to
capitalist economy which in turn in mass unemployment, underemployment and
poverty. One may wonder that despite the argument of the proponents of the

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capitalist school that the market forces will always bring about equilibrium, why
again do we still experienced unemployment and all other economic challenges.
Theoretical model which attempted explain these processes and their
consequences for developing countries urbanization and occupation have
changed considerably over the last two decade.
2.3.1 THE WORLD SYSTEM APPROACH
2.3.2 THE MODERNIZATION THEORY
2.3.3 THE NEO-LIBERAL APPROACH
2.4 ROLE OF THE INFORMAL SECTOR IN THE ECONOMY
Nevertheless, it is obvious that the informal sector have received little or
no attention by the government through its policy makers, the role of the sector
in solving the problems of many people socially and economically cannot be
overlook.
The main roles of this sector are employment generation and GDP (gross
domestic product).
EMPLOYMENT GENERATION: the increased in the growth rate of informal
sector activities can be traced directly to the ineffective and inefficient
performance of other sectors of the economy such as (manufacturing,
agriculture, mines and steel, industry services etc) to provide employment and
income 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 small
amounts and this is because the aim of the migration is to be gainfully employed
in the urban areas but unfortunately. The “labour sponge hypothesis” of then
informal sector has consistently been upheld in virtually all economies
characterized by serious labour market equilibrium (Joan Venek, 2004). The
Nigerian economy is a good example of where informal activities is thriving on

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a daily basis and this is largely due to the fact that the policy makers, having
recognized the fact that the sector could only adsorb a small proportion of the
ever increasing labour force, embarked on a number of polices towards
achieving self reliance and small and medium scale enterprises development.
GROSS DOMESTIC PRODUCT (GDP): informal sector has its crucial role
that its plays on a nation gross domestic product (GDP) specially developing
countries like Nigeria. The data below that comprises of the informal sector and
gross domestics product from the 1970-2010 we be analysis to show how
potential the informal sector in Nigeria has contribute to its gross domestic
product
Table above also show that the informal sector constitutes a very large
proportion of the economy and contributes significantly to employment and the
growth of gross domestic product in Nigeria.
For over three decades, the informal sector in Nigeria has been an
expanding source of employment especially for a large number of literate and
non-literate populations who are unable to access employment in the formal
sector. The informal sector, which has wide range of economic activities,
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
1970 1975 1980 1985 1990 1995 2000 2005 2010
YEARS GDP INFORMAL SECTOR

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operates below officialdom and outside the ambient of public institutions and
regulations
2.5 EMPIRICAL FRAMEWORK
2.5.1 URBAN INFORMAL SECTOR
Informal economy cab no longer be ignored and this is because it forms
as large part of the economy of many economies and comprises 42% of value
added in Africa, 41% in Latin America and 3% in the transition economies of
Europe and the former Soviet union.
It is estimated that informal employment account for 54% of women‟s
employment sub-Saharan Africa (Herald 2012). The proportion of informal
sector employment to the total urban employment is highest in Africa followed
by Asia, Latin America and the Caribbean. Estimates in some south east and
south Asian cities put the share of informal employment to the total workforce
at around 50 to 60% (Rukmana, 2007). The contribution of the informal sector
to employment generation in leading urban centres in selected African countries
mid 1970s ranging from 95% in urban areas in the Republic of Benin to 20% in
Djibouti, with Kumasi (Ghana and Lagos (Nigeria) having 65 and 50%
respectively (ILO, 1985). However, in the opinion of onyenechere (2003), the
importance of the informal sector lies in its contribution to a nation‟s total
economy, while to UNECA/AAPAM (1992) it lies most in the aspect of
training opportunities it provides through apprenticeship. (Kabir 2012),
confirms that Motor Cyclist in Northern Nigeria are high labour intensive and
dominated by small size operators in terms of number of people employed
compared with other formal sectors of the economy. In general, employment
size between 1-9 people was dominant.

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“Fasanya and Onakoya 2010” show that informal sector activities have
significant impact on absorbing the large pool of labour force in Nigeria. The
study contends that human capital formation is positively related to
unemployment rate which reflects the dearth of government expenditure on
education in the country. Therefore, there is an urgent need for the government
to re-examine its policies on informal sector. While (Mike 2012) Empirical
survey evidence showed that the bulk of the new entrants to the urban labour
force seem to create their own employment and income by engaging in the
production and distribution of goods and services in the informal sector. Also
the study shows that there have been some shifts in the educational composition
of the labour force in the informal sector. Therefore, there is need for a well
articulated official policy as an integral part of a national policy on employment
and an incentive scheme for the informal sector. Adesanya (1998) examined the
users and operators characteristics of motorcycle as public transport in Ibadan,
Nigeria. About 91.9 percent of the operators fell between 21 and 40 years. The
operators 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 retrenched
workers and artisans. Also 53.3 percent work on full time basis. The hours of
operation are between 9 and 14 hours a day, with about 63.9% operators
working six days a week. It further shows that 77 percent of the operators are
owner-drivers while 23 percent of them were hired drivers. About 92 percent of
the motorcycles were purchased through full payment while about 6 percent
used hire-purchase. There is no indication of the source of the fund for the
purchase.
In a nutshell, the fact that most African cities are defaced by activities of
some informal sector operators and the fact that the informal sector employs
between 40 and 60% of labour force and contributes betweens a quarter and a

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third incomes in most African countries (ILO, 1985) is a manifestation of the
significance of the informal sector in African.
2.6 SUMMARY
Attempt had been made to review the available literature on the informal
sector in which we start from conceptualizing of the term “informal sector”, the
definition of the term in real situation, the theoretical framework as well as the
available empirical studies.
From the conceptual views, it is known that no economy today was
escaped from the activities of the informal sector not even the so called
developed economy. It also became more obvious that capitalism and informal
sector work hand in hand. In defining the concept, the definitions put forward
by ICLS and by most informal sector surveys concentrate more on the
production unit or enterprise as the unit of measurement or analysis instead of
the worker or job as the unit of analysis.
The available theories and models of the informal sector though helps in
describing what was happening the sector and in particular drawing attention to
the features and characteristics of these models, however were unable to provide
adequate explanations for the reasons for continuous growth of the sector.
While trying to provide explanations, they focused more on the secondary
factors such as rapid population growth, downsizing of the public sector etc.
While neglecting the failure of the state to distribute and allocate resources
efficiently.
In a broader sense, the summary of the available literature on informal
sector can be divided into two; traditional and modern view of the informal
economy,

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From the traditional point of view, the informal sector is that sector of the
economy that only produced marginally. It exists in isolation of the formal
economy and it represents a reserve pool of surplus labour. Most operators in
the sector source for funds on their own through friends and relatives with little
or no skills and training. This clearly shows that such business will die a natural
death with the modern industrial growth as argued by Todaro. Furthermore,
according to the traditional view, most of those in the sector are entrepreneurs
who operate illegal or unregistered enterprises in order to avoid regulation and
taxation. Lastly, it is comprised mostly of hawkers, street traders, small shop
owners, and very small scale producers” mainly local farmers.
3.0 Introduction
The objective of this chapter is to examine the various methods used or
employed in the collection and the analysis of the relevant data in the course of
carrying out this research work. In an attempt to achieve this objective emphasis
was laid on the population of the study, the sampling technique, the type of
data, the model and its simplification as well as method employed in the
analysis of the data collected
3.1 THE POPULATION OF THE STUDY
This research study focuses on the enterprises that fall under the purview
of informal economic activities and this led to the selection of transport sub-
sector(buses, taxi, motorcyclist, shuttle) in specific the capital of Kwara state
Ilorin metropolis in which the sample are to be selected. According to 2006
census shows that population within this city (Ilorin metropolis) represent over

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one third of kwara state population. A total number of 100 questionnaires are to
be distributed to the enterprise mentioned above earlier for the purpose of
administration.
3.3 NATURE AND INSTRUMENT OF DATA COLLECTION
The major sources of data for this research were primary and secondary
sources which were obtained from Central Bank of Nigeria (CBN),
International Labour Organization (ILO), and World Bank etc
The primary data in nature with the use of questionnaire as the main
instrument used in getting information needed for the research analysis.
3.4 METHOD OF DATA ANALYSIS
The research design to be employed in this study was descriptive and
analytical in nature. This is because, according to (Rubin & Babbie 1986),
descriptive statistics is used in research for the purpose of bringing the data in to
order i.e. data presentation, tabulation and summation.
3.5 MODEL SPECIFICATION
In modelling employment generation and informal sector (transport sub-
sector) activities Harris-Todaro surplus labour model is adopted. Many efforts
were made to model the predicted outcome of the Harris – Todaro theory of
surplus labour demand. The models can be useful applications in the analysis of
productivity, earnings and employment determination (Wadhwani and Wall
(1991), Abiodun, (2004, 2006) Kabir (2009), Teal (1995, 1997), Riveros and
Bouton (1991). Thus the empirical specifications of this model are drawn
mostly from Abiodun (2006) and kabir (2009). A labour demand function where
employment is determined by wage rate and cost of capital is specified as
Ld
= αw + βrK..................................................................... (1)

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Where,
Ld
= labour demand
W = wage rate (earnings)
rK = Return to capital
However, given the informal nature of the activities of firms being
investigated, rK is proxies by three different factors: cost of capital/borrowing,
level of investment (size of firm) and profit level. The replacement of rK by
these variables can be explained in two ways.
First, in the informal sector, firm do not have access to formal credit
market, where official interest rate is charged on borrowings; rather they often
resort to the informal financial market where it is usually difficult to keep
record of charges on loans.
Second, the higher the informal cost of borrowing (capital) the lower will
be the opportunity to borrow/invest and this will in turn affect the level of
profit. 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 rate
I = Investment
PR = Profit
U = Random Term

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β1- β2 = the estimation parameters
Given the cross sectional nature of the data, in order to eliminate any
effect of Oscillations that may result in heaters elasticity and ensure constant
variation 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 a
direct positive relationship between employment generation and informal sector
activities.
To estimate the model, simple regression analysis is to be used in order to
reflect the explanatory natures of the variables. In order to verify the validity of
the model, two major evaluation criteria are used.
(i) The a priori expectation criteria which is based on the signs and magnitude
of the coefficients of the variables under investigation
(ii) Statistical criteria which is based on the statistical theory which in order
words is referred to as the first order least square (OLS), consisting of R-square
(R2
), F-statistics and t-test. The R2
is concerned with the overall explanatory
power of the regression analysis and the t-test is used to test the significant
contribution of each of the independent variable (Gujarati 2004).
3.6 VARIABLE MEASUREMENT
The relevant variables of the model are measure as follows. The number
of the employee in each firm is used as a proxy for labour demand by the firm
represented as Ld
in the equation; wage is measure by average earnings per
employees generation from the activities of the informal transport sector.
Investment is measured as the total amount of capital invested by the firm in the
business at a particular period

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4.0 INTRODUCTION
This chapter deals mainly with the presentation and analysis of data in
which descriptive statistics method was used for the socio-economic variables
and the ordinary least square regression was for the model.
A total number of 100 questionnaires were administered in which the
researcher was able to collect 89 as 11 were returned either unfilled or not filled
correctly.
Therefore, the results are interpreted and discussed in this chapter.
From the above table, (1) shows that 100% of the operators in the
informal transport sub sector are men. This however, is not surprising because
of the culture background and religious belief of the people of northern Nigeria
in which kwara state belongs which doesn‟t support women to operate such
business. Hence, it shows that the informal transport sub-sector is exclusively
for men.
(2) Shows that 23.5% of the operators are within the neighbourhood of
18-30% years, 33.7% are between 31-45 years, and 46-60 also have also have
30.3% while the remaining 12.4% goes to 61year above. The relatively high
percentage in the age group of 18-30 is a manifestation of the fact that majority
of people in this age bracket are in active period with secondary school or under
apprenticeship training. Furthermore, the 33.7% of 31-45 shows that the sectors
becoming increasingly attractive to the youths who form the large proportion of
unemployment 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 this
form of business does not requires any kind of formal education, 33.7% of the

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respondents attended primary school, about 39.3% attended secondary school,
while 15.7% attended tertiary institutions. This shows that majority of the
operators have little or no formal education would go a long way to enable
operators in the sector to make use of modern technological inputs, improve
their customer relations also adopts more modern effective changes.
(4) Clearly indicate that 40.4% of the operators were financed by the
government, which is not strange as a kwara state government is embarking on
youths empowerment programme with the objective of poverty reduction and
employment generation through granting of soft loans to the youths. The 38%
that goes for personal savings was not also by accident, but by the determination
of 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 was
difficult to obtain loan from these organisations.
(5) Shows that about 55.1% of the operators have access to loan while the
remaining 44.9% have no access. This buttressed what we have showed earlier
about the state government towards youths employment as further investigation
reveals that about 50% of the loan were provided by the government, while
micro-finance have 15%. The implication of this the micro-finance banks have
more to do to encourage more youths in the sector.
(6) Shows that 58.4% of the informal transport sub-sector operators have
employee/ apprentice undergoing training/ working respectively. The remaining
41.6% is understandable because of the nature of the work as some of them are
working on their own, while others have graduated their apprentices to become
self employed on their own.
(7) Made it crystal clear that 86.5% of the operators pay tax to the
government. Though some of them refused to disclose the actual amount paid to
this researcher as they claimed they have no structured tax. Invariably, one way

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or the other, the operators of the sector contributes in no small measure to
government revenue.
About 13.5% of the respondent claimed not paying any amount to the tax
authority, just as they explained that they have their own way of avoiding the
tax authority (tax avoidance).
(8) About 84.3% of the operators feel the impact of government policy on
their business, while the remaining 15.7% are indifferent to government policy.
However, further interactions with the operators reveal that a large proportion of
the operators felt the impact of government policy negatively with the
deregulation policy as the chief of all policies affecting their business.
(9) lastly, the income distribution shows that about 28.9% of the
operators/workers generate income between 5,000-10,000 monthly. This shows
that the operators are living a little bit above poverty line, though the peanuts
cannot sustain them to have a good living standard. Also, about25.8% of the
operators generates income between 11,000-20,000 monthly, and this is
relatively above the benchmark of poverty line, while 37.1% received income of
21,000-40,000 monthly. Only about 12.4% generated income of 41,000 above
and this is an indication that much needs to be done to stimulate the business so
as to improve their income level.
It should be noted here that according to the united nation (UN), the
poverty 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 researcher
found it challenging to have a clear picture of the major challenge facing the
operators in the business. However, many of them have similar challenges some
of which are, deregulation of the downstream sector of the oil and gas industry,

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police extortion, multiple taxes, bad roads and security agent harassment among
others
4.2 REGRESSION RESULTS.
Dependent Variable: LOG(LABOURDEMAND)
Method: Least Squares
Date: 04/15/13 Time: 19:10
Sample: 1 89
Included observations: 89
Variable Coefficient Std. Error t-Statistic Prob.
LOG(PROFIT) -0.043506 0.041993 -1.036021 0.3031
LOG(WAGE) 0.443953 0.052917 8.389594 0.0000
LOG(INVESTMENT) 0.195269 0.059281 3.293928 0.0014
C -5.323416 0.697072 -7.636827 0.0000
R-squared 0.632047 Mean dependent var 0.454513
Adjusted R-squared 0.619060 S.D. dependent var 0.495260
S.E. of regression 0.305676 Akaike info criterion 0.511320
Sum squared resid 7.942214 Schwarz criterion 0.623169
Log likelihood -18.75376 F-statistic 48.66926
Durbin-Watson stat 1.780619 Prob(F-statistic) 0.000000
From the regression result, shows the negative constant shows that all
things being equal, without considering the three independent variables in the
model, labour demand will be decreasing in the informal sector by
approximately 5% every year.
This is understandable as this sector depends largely on all these
variables. The result also shows that there is a positive direct relationship
between labour demand and wage and investment as they both have the

23
expected signs and conform to the a priori. By implication, it means that
increase in the wage level and investment will lead to increase in labour
demand. Also, both investment and wage are significant at 5%.
From the result, mean labour demand went up by 0.443953% for a naira
increase in wage. In other word, 0.44% increase in labour demand will be
accounted for by a naira increase in wage. On the other hand, holding other
exogenous variables constant (wage and profit), a 1% increase investment led to
an average 0.195% increase in labour demand and the coefficient is statistically
significant.
Labour demand has an overall negative relationship with profit -
0.043506. This means that an increase in the profit rate will discourage labour
demand which is contrary to the theoretical issues, because in theory an increase
in profit is expected to accompanied with expansion in business and by business
expansion more labour is expected to be employed but because of the nature of
this informal transport sub-sector business increase in profit will discourage
employment of more labour, due to the fact that this business are mostly one
man or family business were they don‟t need to employ or hired more labour
even if there is an increase in profit. The negative relationship between labour
demand and profit can be explained by the fact the business is mostly informal
and owners are likely to bring in their relatives into the business, rather than
hire more labour from the labour market. Generally the results show that profit
is 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 the
influence of other exogenous variables held constant as profit rate increases by a
naira on the average, labour demand goes down by 0.04%.

24
The R2
which is the coefficient of multiple determinations 0.632047
shows the good fit of the model. In other words, it exhibits a good fit and has a
strong predictive power. By implication, it shows that about 63% variation in
labour demand is explained by the variables captured in the model while the
remaining 37% is catered for by the error term which are those variables that
cannot be captured in the model.
The t-statistics which is used to test the individual significant of the
exogenous variable shows that all the variables are significant at 5% level of
significant.
The F-statistics which is used to test the overall significance of the
variables in the model is also significant with 0.000000 probability.
Using probability, constant, wage is significant at 1%, investment is
significant at 5% except profit which is not significant either at 1% and 5%.
The Durbin Watson statistic of 1.78 however indicates presence of
autocorrelation in our residuals. Although with the presence of autocorrelation
our OLS estimation are no longer efficient, they remain unbiased, consistent
and a significantly normally distributed.
5.1 INTRODUCTION
This chapter is the last chapter as well as the concluding part of the
research work. In the last two chapters, we have presented the model and the
result of the regression equation was computed and hypothesis was tested using
different statistical testing techniques. Therefore, in this chapter we attempted to
draw conclusion from the findings of this research. Invariably, this chapter
comprises of the summary of the research work entirely, the conclusion from
the finding and lastly recommendation are put forward based on the conclusion.
5.2 RECOMMENDATION

25
In respect of the empirical findings of this research work, the following
recommendations are being put forward.
1. There is no doubt that informal sector activities have contributed to
employment generation in kwara state, based on the finding, hence,
government must put in place measure, policies and programmes that will
enhance the growth of the sector which in turn will generate relatively
adequate income for the operators so as to enable them live above the
poverty line.
2. The findings also showed that investment moves in the same direction
with labour demand, hence it is recommended that government should
make it a law for both commercial and micro-finance banks to set aside
certain percent for small-medium scale enterprises like the informal
transport sub-sector as this will stimulate investment and in turn generate
more employment
3. As the sector is contributing to government revenue through payment of
tax, government should henceforth check the problem of multiple taxes
being levied on the operators in the sector. This could be done by making
it public the actual amount that must be paid as tax by each individual
operator. This will go a long way to encourage more workers in the
sector.
APPENDIX
NOTE: FULL MATERIAL ON THIS PROJECT SHOULD CONTACT ME
E-MAIL: SHEFT_WALE@YAHOO.COM
MOBILE: 08066924755, 08086216037.
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