The rising insecurity in Nigeria is stifling local and foreign investment and threatening to curb economic output in a country whose economy has not grown in per capita terms since 2015 and where the rate of unemployment is the second highest globally.
Between January and May 2021, some 4,280 Nigerians have been killed due to insecurity in Africa’s largest economy, according to data by the Council on Foreign relations (CFR).
That’s the highest number recorded in the first five months of any year in nearly 10 years, except in 2014 and 2015 when the insurgency in Borno State led to the death of 2,000 Boko Haram members in a raid of Sambisa Forest.
What is worse is that the CFR’s data is gathered from international and local media for reports on insecurity incidents and is likely an underestimate of insecurity incidents, as not everything is reported.
The escalating insecurity and communal violence, which is now strengthening separatists movements across the country, is like nothing many of Nigeria’s youthful populace have seen before. For older Nigerians, only the civil war of 1967 comes close.
The economic implication of rising insecurity in a country that is starved of private investments is “enormous” according to investment bankers and business leaders, who fear the insecurity would slow the pace of new investments and scuttle government’s efforts to create jobs in a country where jobs and economic growth already lag a rapidly growing population.
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“Insecurity is a big deterrent to investment anywhere in the world,” the leader of one of Nigeria’s largest investment banks told BusinessDay in an interview at his Lagos office.
“The most insecure countries are typically the ones to attract the least investment, security ranks up there with market size and ease of business when an investor is sifting through countries to invest in. When you add Nigeria’s economic woes to the rising insecurity, it takes the risk premium on the country to a whole new level at a time,” he said.
The rising insecurity is an indictment on Nigeria’s President Muhammadu Buhari who handpicked security, along with corruption and the economy, as major focus areas for his administration when he first rode into power in 2015 before he campaigned along the same lines in the 2019 elections which he won.
Critics say Buhari made matters worse when he threatened to treat agitators for a secession in the “language they understand” referring to how the government brutally quelled a prior secessionist movement by the Igbos that lasted three years between 1967 and 1970 and cost the lives of over a million Nigerians.
But at the heart of Nigeria’s rising insecurity are deeper rooted economic problems that the government is yet to meaningfully resolve. The economy is not growing fast enough to create opportunities for a bulging population and that has seen poverty levels rise to record levels. Nigeria is home to the world’s largest population of poor people at 87 million, according to a Brooklings Institution report. That’s about the population of Canada and Spain combined.
“In a country where poverty levels and unemployment are high, it creates an incentive for insecurity, people would do just about anything to survive even if it means harming others,” said Omotola Abimbola, an analyst at investment bank, Chapel Hill Denham.
“Nigeria is yearning for better economic outcomes through reforms that can boost economic growth and create jobs. The government needs to double down on this goal,” Abimbola said. “It’s a major way we can resolve the insecurity crisis, while we also find ways to allow the other federating units contribute to security in the country.”
One in every two Nigerians in the country’s labour force is either unemployed or underemployed.
Unemployment has trended upwards, hitting 33 percent at the end of 2020, because the private sector who is the chief creator of jobs in progressive countries has been stifled by government policies and a difficult operating environment.
The rising level of insecurity adds to Nigeria’s pre-existing deterrents to investment and is threatening to increase the level of unemployment and poverty.
“It means the insecurity we are seeing today will worsen and sadly every Nigerian is at risk, not just the government officials that have let us down,” a business leader who did not want to be named said.
Nigeria has had to manage Foreign Direct Investment inflows of around $1 billion since 2015, a third of what smaller African peer Ghana attracted in the same period.
Investment as a percentage of GDP is below 15 percent but economists say the target should be atleast 20 percent for a country with such a large population.
China’s gross fixed investment as a percentage of GDP was 40 percent in 2019, according to World Bank data. Indonesia and Malaysia’s numbers were 32.16 percent and 25 percent.
