Abstract:
This study examined the dynamic response of informality to the openness of the Nigerian economy over the period 1970 to 2011. The study used ordinary least squares (OLS) methodology. The results of the long-run model indicate that openness (though not statistically significant) increases informality, while state regulatory activities impact significantly and positively on informality in Nigeria. The study recommends that policies that encourage openness in Nigeria should be carefully implemented so that informal activities in the external sector (which are predominantly illicit) can be curtailed. Also, excessive/repressive state regulatory activities that could drive economic units underground should be avoided.