Ban On Street Trading: Nigeria To Lose N15trn In GDP | Independent Newspapers Limited
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Ban On Street Trading: Nigeria To Lose N15trn In GDP

Posted: Jul 11, 2016 at 4:30 am   /   by   /   comments (0)

Kirk Leigh

The recent ban on street trading by the Lagos State government apart from posing security threat may slowdown economic growth as informal trading, comprising hawking and street trading, accounts for 10 percent of Nigeria’s gross domestic product (GDP), according to figures obtained from the National Bureau of Statistics (NBS).

Flagging off the danger posed by the Lagos ban on street trading, Yemi Kale, Director General of NBS, recently tweeted that “informal trading of which hawking is a part thus accounts for 10% of total Nigeria’s GDP, bigger than crude production”.

Crude oil production accounts for 6.4 percent of GDP, closely following telecoms, which contributed 8.7 percent in 2015, according to NBS figures.

Kale said Lagos accounts for the highest number of informal sector activity at 8.7 percent, which is two times bigger than Kano, the second highest at 4.8 percent, meaning that these two states would suffer most from an absence of informal trading because of their respective levels of exposure.

Going by NBS estimations, which put informal sector contributions to GDP at 41.8 percent or about $217.3 billion to the country’s $520 billion nominal GDP in 2015 and informal trading accounting for about 10 percent, potentially about $52 billion or N14.6 trillion could be knocked off the national economy if informal trading is stifled in Lagos, the commercial nerve centre of Nigeria.

According to analysts, there are downside costs associated with eradicating street trading as much as there are advantages. It does have a negative implication on the GDP and growth.

“Yes, while I can’t quantify it, there are immediate negative implications for the economy when street trading is disrupted. But I will like to look at it in relation to the costs and benefits to the economy”, says Ogho Okiti, an economist and CEO of Time Economics.

According to him, getting traders off the streets can lead many to slip into poverty.

“Cost to the economy is loss of income to the most vulnerable in our society, and thus this could cause them to enter the poverty threshold or exacerbate it if they are already in that bracket”, he said.

“Because most purchases on the street are impromptu, it thus means that some of these sales will never be made except on the street. So, it will diminish the size of the GDP in that respect”, Okiti noted.

He did not dwell only on the downside as he enumerated benefits and the way forward.

“Benefits includes semblance of order. We need that, very desperately. Street trading is one of the greatest symptoms of disorderly societies.

“Going forward, the key point is how the government organises economic activity. Essentially, if every aspect of our economy is organised, street trading will vanish”.

Most analysts say in the short-term crime will rise as most street traders will lose their means or source of livelihood and may resort to crime to survive.

The ban, according to them, will also increase inventories in factories as that outlet of sales is shut down, which may lead to downsizing and exacerbate poverty in the country.

To others, any effort to strengthen the urban jungle that Lagos tends to be should be a commendable move. However, they claim that since many have been on the road for long and can predict that laws like this are initially enforced with fierce punitive measures and relaxed around election times, the directive may not be fully implemented.

According Moses Iginla, a town planner, there are two thoughts on the ban. One is that the hubristic zeal driving the decision clouds certain key arguments that should be advanced for the contribution of street traders to the Lagos economy.

Street vendors, a part of the informal economy, form a key part of urban economy.

Globally, he said the informal sector is said to employ more than a billion people as a number of studies have shown that apart from being a source of employment/income for an economic underclass, they are also drivers of the formal sector.

“In developing countries such as Nigeria where viable structures are lacking, the informal sector is a channel of distribution for goods produced in the formal sector and their activities have a multiplier effect on the rest of the economy,” Iginla stated.

“In 2013, Lagos State announced that its informal sector was worth N7.62 trillion. It will be difficult to accurately breakdown how much street vending contributes to this sum but we know these activities drive the Lagos economy,” he added.

He stressed the fact that street vendors may seem like environmental nuisance that should be repressed but they are also part of what makes Lagos self-sustaining.

Elder Ibitayo Amole, a retired banker and entrepreneur, believes that vulnerable populations like women for whom street vending is their closest claim to entrepreneurship would be negatively impacted.

Some of these women, according to him, are sole breadwinners striving to exist within Nigeria’s strangulating patriarchy.

“What becomes of them if they lose their means of livelihood? How far has the Lagos State government thought this idea of the ban through and what long-term plans does it have to protect populations like women who will be disproportionately affected?

“I have been to major cities in the United States and in Western Europe and street trading takes place all the time. They do not hawk because it is not part of their culture but they have street traders too. Urban planners regulate their activities,” he noted.

He said in New York, street vendors range from performance and fine artists, to food vendors who sell their wares in a cart. I was in Cambridge, Boston, recently and right there in Harvard Square there were artists and beggars sitting side-by-side and hustling their daily bread.

“The US urban planning is definitely more sophisticated and much far-sighted than Lagos and that is why it absorbs these informal activities without getting overwhelmed. Lagos too can engage artists, architects, and urban planners to redesign the cityscape to absorb these activities. For one, the city mostly lacks basic urban infrastructure such as pedestrian sidewalks and both human and vehicular traffic chaotically compete for space. Lagos can, for instance, address this rather than take the easier route of a ban”, he stressed.

Equally, the potential GDP erosion from banning street trading may trend the recent projection by Fitch Rating, which had forecast Nigeria’s GDP to fall to 1.5 percent in 2016 from 2.8 percent in 2015. This is worse than the International Monetary Fund’s forecast of 2.3 percent– lowest since democracy returned in 1999.

Already, there are fears that the economy may slip into recession with a negative GDP of -3.4 percent in the last quarter of the year even if there was a bright spot in purchasing managers index (PMI), which showed a pick-up to 50.2 in June from 48.2 in May

The Lagos State government is waging a full-scale war against street trading and hawking and this is seen as a desperate bid to sanitise the streets of their nuisance. They are dredging up a 2003 law to ban street vending.

To this end, Akinwunmi Ambode, Lagos State governor, recently directed law enforcement agencies to commence a total enforcement against street trading and street hawkers from July 1, 2016, saying that the law banning their activities across the metropolis would take its full course.

The governor, who spoke at a live interview, said that the renewed enforcement is in line with Section I of the Lagos State Street Trading and Illegal Market Prohibition Law 2003, which restricts street trading and hawking in the metropolis.

Following Governor Ambode’s pronouncement, the Lagos State Taskforce on Environment and Special Offences vowed to commence a total enforcement on street trading across the state as directed by the governor.