Economy takes a beating as insecurity worsens
Despite repeated assurances from President Muhammadu Buhari and the security chiefs, many Nigerians are at the mercy of bandits, terrorists and other criminals who are ravaging many parts of the country.
Apart from the destruction of lives and property, the Nigerian economy continues to suffer as rising insecurity dents investors’ appetite to invest in the country.
Terrorism and other forms of insecurity have persisted for more than a decade unabated, despite the billions of naira spent on security annually. Available reports show that Nigeria has one of the highest security spending in Africa, but for many years, that has not translated into improved security.
A 2019 report by the United Nations Development Programme, titled ‘Measuring the Economic Impact of Violent Extremism in Africa’, revealed the impact of terrorism in African countries, with Nigeria leading in terms of fatalities and economic loss.
According to the report, Nigeria lost $40.828 million in terms of the cost of fatalities and injuries, and lost an estimated $598.8 million in terms of cost of destruction of properties.
The report also shows that Nigeria has the highest security spending at $78.43 billion in 2017, followed by Morocco at $42.52 billion. But, while Morocco saw the lowest security threat within the period with less than 2,000 fatalities, Nigeria had the highest in the African region with more than 180,000 fatalities.
The report further found that Nigeria and other countries with higher levels of violent extremism have had weaker economic growth than other countries. It revealed that within the group of focus countries, there is a 64 percent difference in GDP growth between those with high and low levels of terrorism.
It said: “From 2002 to 2016 on average, at-risk countries grew their GDP per capita by 47 percent and spill-over countries grew by 36 percent. In contrast, epicentre countries (such as Nigeria) on average had a 17 percent decline in GDP per capita.
“From 2002 to 2016 across the different groups in the focus countries. Epicentre countries had a decrease in GDP per capita growth in 2011 with the onset of the Libyan conflict and a slowdown in growth in Nigeria. The slowdown in growth in the epicentre countries lagged behind the increase in the impact of terrorism, which really took off after 2006.”
The Nigerian Economic Summit Group and experts warn that insecurity is a major drag on investor confidence and negatively affects Foreign Direct Investment (FDI).
In 2020 alone, Nigeria lost $40.6 billion worth of investments to insecurity, according to the Global Terrorism Index.
Data shows that Nigeria recorded $699 million in FDI inflows in 2021, the lowest level since 2013. According to the United Nations Conference on Trade and Development, FDI flows stood at $5.3 billion annually from 2005 to 2007, dropping to $3.3 billion from 2015 to 2019, a period when Nigeria recorded widespread terror attacks.
A 2021 report from the Nigerian Investment Promotion Commission revealed that investment announcements in the country fell to $1.69 billion in the second quarter, from $8.41 billion in the first quarter of 2020 due to heightening levels of insecurity.
Apart from foreign investments, agriculture, which is hoped to drive the diversification goal of Nigeria and the largest employer of labour, is one of the most-hit sectors. Farmers have consistently been targets of these terrorists for many years.
Dozens of farmers have been massacred across Northern Nigeria and even parts of the southern region. For fear of their lives, they have abandoned their farmlands and produce, and others cannot access their farmlands.
The situation largely pushed the food inflation rate to rise to 18.37 percent in April from 17 percent in March 2022. Consequently, the United Nations Food and Agriculture Organization warned that about 19.4 million people would face food insecurity across Nigeria between June and August 2022.
In addition to agriculture, every sector of the economy is impacted directly or indirectly by this menace. Education, which is said to be the bedrock of development, providing the needed human capital, is not spared by these terror groups.
The United Nations Children’s Fund said insecurity forced over 11,536 schools across the country to shut down in 2021 following mass abductions. More so, over 1.3 million students have been pushed out of school and millions more are projected to fall out of school if the government does not take deliberate measures to curb insecurity.
Agusto & Co, in a 2022 report titled “The Economics of Insecurity: Nigeria’s Rough Patch’, said security concerns in the country had also hampered access to raw materials in certain locations, thus disrupting production cycles and driving up costs.
It added that many transportation and logistics providers were charging higher fees to specific regions, as security risks were being factored into the fares.
According to the National Bureau of Statistics, the average air fare charged for specified routes was up 28.26 percent in 2021 while the average charge for intercity bus journeys was up 35.65 percent within the same period.
The report further recommended that tackling poverty and unemployment from their root causes is crucial to winning the war against terror. It said while pro-poor growth strategies and social welfare are crucial to assuaging poverty, strengthening institutions and investing in infrastructure is key to stimulating investments that would support long-term economic growth and stimulate job creation.
“The Nigerian military and police need major reforms and restructuring because the existing security structure has shown little progress. Therefore, in our opinion, an expansion in anti-terror capabilities, as well as improvements in reconnaissance and surveillance, are crucial to identifying and blocking funding channels for terrorists. Intelligence gathering in addition to improving the relationship between the citizens and security agencies is also critical in resolving the current quagmire,” it read.