By Obinna Chima
Nigeria is on course to reduce the size of its shadow economy by 2025, according to a new study by the Association of Chartered Certified Accountants (ACCA).
A shadow economy is best described as the production of and trade in legal goods and services that are deliberately and often illegally concealed from public authorities, for example, black market transactions and undeclared work.
The report titled: â€œEmerging from the Shadows: the shadow economy to 2025,â€ estimated that the shadow economy in Nigeria represented 48.37 per cent of the countryâ€™s Gross Domestic Product (GDP) in 2016. This was forecast to fall to 46.11 per cent of GDP by 2025.
Also, the global average was expected to fall from 22.5 per cent to 21.39 per cent of GDP over the same period.
â€œThe prevalence of shadow economy activity creates considerable practical and ethical issues for both business and government,â€ the Market Head for Nigeria at ACCA, Tom Isibor said.
â€œThe fall in the shadow economyâ€™s overall share of Nigeriaâ€™s GDP is a very positive sign that efforts to curb its impact have been implemented in recent years. But thereâ€˜s still a long way to go
â€œOur research estimates that the current factors that will determine Nigeriaâ€™s shadow economy are: corruption control, GDP per capita and bureaucratic quality.
â€œThere 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,â€ the report added.
On her part, the Regional Head of Policy for sub-Saharan Africa at ACCA, Jane Ohadike stated that the 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.
â€œEffective management of the shadow economy requires action at all levels â€“ government, cities, local communities and individuals,â€ she added.