• Saturday, June 22, 2024
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How rising insecurity affected the economy in 2021

Domestic capital seen as missing piece in Nigeria’s infrastructure puzzle

Nigerians cheered when new service chiefs were appointed in the first month of 2021 to fight the rising insecurity but the situation escalated during the year with a surge in kidnapping, loss of lives, properties and huge economic costs.

Rising violence in the country cost Nigeria 11 percent of its GDP with N119 billion. Similarly, projects worth N12 trillion were abandoned across Nigeria due to insecurity and other challenges according to data from TownTalk solutions.

In the same vein, the global peace index for 2021 compiled by the Institute for Economics and Peace ranked Nigeria 146th out of 163 countries with a score of 2.712, while among Sub-Saharan African countries the country was ranked 39th out of 44 countries examined in the region.

On its travel advisory, the US Department of State; Bureau of Consular Affairs, and the Canadian Government advised against traveling to Nigeria.

Violent crime such as armed robbery, assault, carjacking, kidnapping, hostage-taking, banditry, and rape are commonly reported across the country.

Kidnapping for ransom occurs frequently, often targeting dual national citizens who have returned to Nigeria for a visit, as well as U.S. citizens with perceived wealth,” US Department of State said.

Both countries specifically highlighted states in the northern region as hotspots for terrorism, kidnapping, inter-communal and sectarian violence, etc.

While the northern region of the country continues to be a hotspot for insecurity, the south is fast becoming vulnerable as security crises creep into the region.

According to experts, insecurity affects economic growth by drying-out investments, increasing unemployment, and dwindling government revenue, among others.

Security threats in 2021:

Threats to security range from kidnapping to terrorism, communal and ethnic clashes, police violence, criminal activities among many other problems, all of which significantly impact the country in terms of economic prosperity, population, etc.

Read also: Insecurity was Nigeria’s biggest challenge in 2021 – Lai Mohammed

In the first half of 2021, no less than 2,371 persons were kidnapped in 281 separate events with N10 billion ransom demanded, according to a report by SBM Intelligence, a geopolitical and economic research firm in its 2021 half-year kidnap report.

SBM also revealed that as of September 2021, no less than 1,409 students and 17 teachers were kidnapped from their schools in Nigeria with at least N220 million paid out as ransom while 16 of the victims died in these incidents.

During this period, the North-west recorded the highest number of deaths which was 961 while the south-west recorded the least with 102.

Between July and September 2021, about 2,287 deaths were recorded from violent incidents, including attacks by Boko Haram insurgents, herdsmen and bandits, with 176 security personnel reported killed.

Experts are of the opinion that the number of deaths that occurred is more than the number of deaths and incidences recorded and reported.

Data from Beacon Consulting also revealed that a total of 4275 persons were kidnapped and 7886 fatalities were recorded.

Impact on the economy

The impact of insecurity is reflected on the performance of macroeconomic indicators, investment inflow as well as economic performance.

Although data for 2021 is not available yet, as of 2020, over $40.6 billion worth of foreign investments were diverted from the Nigerian economy as a result of insecurity according to the Global terrorism index.

This had implications for job creation and economic prosperity as purchasing power declined. Nigeria is now regarded as the world’s poverty capital and has an estimated 91 million people living in extreme poverty which is projected to reach 106.6 million by 2030.

Telecommunication companies were not left out as MTN projected a possible disruption in service provided due to rising insecurity challenges.

Human capital development also met with a hitch as schools in the north shut down to avoid recurring cases of kidnapping.

The insecurity challenge also affected other sectors in terms of government revenue allocation as the security budget continues to increase year on year.

Data from BudgitIT shows that in 2020 the Federal Government allotted N1.78 trillion for security expenses which is approximately an 83.7 percent increase from the N969 allocated for the same in 2015.

Also, as major regions and states in the country became the hotspot for activities that threatened peace and security, people were forced to move to safer locations within and outside the country. Consequently, places like Abuja, Lagos, etc. are gradually becoming home to migrants resulting in overpopulation of select places.

Insecurity also contributed to Nigeria’s inflation performance, although data from the National Bureau of Statistics (NBS) showed that it decelerated consecutively from April, however, this failed to reflect the reality in the market as prices of goods and food items surged significantly.

Reacting to the situation in April 2021, the House of Representatives urged President Muhammadu Buhari to urgently declare a state of emergency on the security sector so as to effectively tackle the menace. Similarly, the president also appointed new hands to take over the security architecture of the country all in a bid to tackle insecurity.

Outlook for 2022

Experts have noted that Nigeria’s insecurity might not be so different from what was experienced in 2021 especially with 2023 elections on the way.

According to Towntalk Solutions, there would be continued attacks on key facilities and government assets in the build-up to the 2023 general elections.

“Regional conflicts and state security challenges spread beyond defined borders to affect neighbouring territories. Businesses will face tough decisions on continuing and safeguarding operations in otherwise low-risk areas,” they noted.

Analyst at SBM also noted that there might be increased organised armed vigilante groups to defend themselves and communities against bandits, pastoralists and kidnapping attacks.

“The election year will see the flow of small arms into these groups, increasing clashes across the country. Terrorists will begin to strike more frequently in the bigger urban centres in the North, including the Federal Capital, Abuja as an influx of hardened fighters from neighbouring Sahel countries such as Burkina Faso and Mali will swell the numbers of terrorists in the region,” the analysts noted.

According to SBM, insecurity will continue to remain a daunting challenge with more attacks in urban areas across the country, as people looking to escape attacks in villages and towns crowd the urban environment for security.