By Adaeze Okechukwu
ASSOCIATION of Chartered Certified Accountants, ACCA, in a recent study, revealed that Nigeria is on the course to reduce the size of its shadow economy to 46.11 per cent of the Gross Domestic Product, GDP, by 2025 from 48.37 per cent in 2016.
The report, entitled ‘emerging from the shadows: the shadow economy to 2025’ described a shadow economy as the production of and trade in legal goods and services that are deliberately and often illegally concealed from public authorities.
Hence, the goods are typically undeclared for tax. According to the report, the shadow economy in Nigeria represented 48.37 per cent of GDP in 2016 – which is approximately N 49.67 trillion. The global average is expected to fall to 21.39 per cent of global GDP from 22.5 per cent over the same period.
Market Head for Nigeria at ACCA, Tom Isibor, explained that the prevalence of shadow economy activity creates considerable practical and ethical issues for both business and government. He stated: “The fall in the shadow economy’s overall share of Nigeria’s GDP is a very positive sign that efforts to curb its impact have been implemented in recent years.
But there‘s still a long way to go. Our research estimates that the current factors that will determine Nigeria’s shadow economy are: corruption control, GDP per capita and bureaucratic quality. There are steps that government, business and society can take to curtail the shadow economy, ensuring that all workers and businesses retain the rights associated with the legal trade of goods and services.”
Regional Head of Policy for sub-Saharan Africa at ACCA, Jane Ohadike, stated: “Shadow economy presents an enormous challenge for society and a huge potential opportunity for the profession to play an active role across the entire value chain from measurement and monitoring through to helping shadow firms and individuals manage their financial affairs and possibly make the transition from informal to formal.”
“Effective management of the shadow economy requires action at all levels – government, cities, local communities and individuals.”