Informal Trade and Poverty Reduction in Nigeria: Unpacking the Link between Trade and Poverty Rates in Border Regions

Abstract

This study explores the critical role of informal trade in poverty reduction in Nigeria's border regions. In an era marked by deepening economic interdependence, informal cross-border trade has become a lifeline for many households, especially in economically vulnerable areas. While cross-border trade is often overshadowed by formal trade mechanisms, its impact on local livelihoods cannot be overstated. The research identifies a significant gap in the existing literature regarding how informal trade functions as a poverty reduction tool, particularly in the context of Nigeria’s porous borders with neighbouring countries. The objective of this study is to examine how informal trade impacts poverty levels and identifies key challenges and opportunities for policymakers. The methodology is based on secondary sources, including scholarly articles, policy documents, and trade reports, which collectively highlight the socioeconomic dynamics of border communities. The key findings indicate that informal trade provides crucial income and sustains food security in border regions, particularly for women and small-scale traders. Despite its positive contributions, informal trade is often unregulated, posing governance challenges and undermining state revenue collection. The study recommends adopting simplified trade procedures for small consignments, increasing financial inclusion for traders, and improving border infrastructure to streamline trade operations. Additionally, the study emphasizes the need for gender-sensitive policies that support women in informal trade, as they are key players in the sector. Informal cross-border trade, while offering short-term poverty alleviation, must be recognized and integrated into formal economic systems for sustained development.