How Large Is the Size of Nigeria’s Informal Economy? A Mimic Approach

Abstract

The purpose of this research is to estimate the size and development of the Nigerian informal economy using the MIMIC Model approach as well as the amount of tax revenue government losses every year due to the growth of the informal economy. Findings from the MIMIC model revealed that: the size of the informal economy in Nigeria ranges between 47 and 67 percent from 1970 to 2018, and averages 56 percent of the GDP over the same period; and that the nation, on average, losses 56 percent of her potential tax revenue yearly to informality, with the estimated tax revenue loss being around ₦3.5 trillion in 2018. The study concludes that regulation burden, unemployment, and institutions are the key drivers of informality in Nigeria.