Insecurity costs Nigeria $40.6bn worth of investments in 1 year
Over $40.6 billion worth of foreign investments were diverted from the Nigerian economy in 2020 alone as a result of insecurity. This is equivalent to 1.5 percent of global GDP.
Nigeria is currently grappling with security challenges ranging from farmer/herder clashes, cattle rustling, banditry, kidnapping and Boko Haram insurgency. Boko Haram is translated from Hausa to mean “Western education is forbidden”.
For many Nigerians, especially those in the northern part of the country, Boko Haram is associated with the loss of loved ones, property, and means of livelihood. From the findings of the Global Terrorism Index (GTI), Boko Haram is the deadliest terrorist group in the world and their focus is Nigeria, Africa’s biggest economy.
The terrorist group has caused massive destruction across northern Nigeria in the last decade. Aside from the kidnapping of 276 schoolgirls in Chibok in 2014 which made global headlines, many more attacks launched by the group have resulted in several deaths and altered lives forever.
The atmosphere in and around many towns in North-East Borno State is as tense as ever, as lives and properties are still being taken by the terrorists.
Recently, the state has been ravaged by a deadly conflict between the military and the Boko Haram jihadists. Some time ago, the authorities announced they wanted to close the Borno refugee camps as they claimed the insurgency was almost eradicated. However, in recent months, deadly attacks have taken place on the outskirts of the regional capital Maiduguri.
The persistent issue of insecurity in Nigeria has been fingered as a major reason behind foreign investors pulling out their investments from the country.
“The direct costs associated with violence include the immediate consequences on the victims, perpetrators, and public systems including health, judicial and public safety. The indirect cost of violence refers to longer-term costs such as lost productivity and investments, resulting from the physical and psychological effects and the impact of violence on the perception of safety and security in society,” the global peace report indicated.
Michael Ogunremi, a macro-economist and fixed-income analyst at Chapel Hill Denham stated that the current insecurity levels in Nigeria are most likely going to hamper the influx of foreign direct investments considering the unattractive nature of the country’s macroeconomic environment.
“I think insecurity is a serious concern because if I were a foreign investor, I wouldn’t want to visit states like Borno, Kaduna, or most northern states in general. As an investor, the risk perception for investing in those parts of the country seriously outweighs any benefits that can be realised from such a venture,” Ogunremi stated.
“The major disadvantage of insecurity is that it affects tourism, foreign direct investment, and foreign portfolio investments (FPIs) because there is the make-belief that FPI’s are mostly influenced by interest rates. However, there are also macro-economic sentiments that also come into play in these situations,” he added.
“Indeed, consumer companies stand to reap the dividends of peace in northern Nigeria if the military can bring to an end the activities of Boko Haram in those regions,” Ogunremi noted.
Growing insecurity in Nigeria in recent years has coincided with rising poverty levels as the country now has an estimated 91 million people (43% of its population) living in extreme poverty (less than $2 a day). This is up 29 percent from 70 million in 2016 and this is projected to reach 106.6 million by 2030. Nigeria is now regarded as the world’s poverty capital.
The disruption to lives and livelihoods and the surge in the number of internally displaced people (IDPs) are on the verge of triggering a humanitarian crisis. Many displaced people are being prevented from accessing vital services such as healthcare, and farmers are unable to plant or harvest crops.
In some cases, armed bandits insist on payments before farmers can have access to farmlands in the planting season. They return during the harvest season and extort farmers before access is granted to their farms. This has led to scarcity and a surge in the prices of certain food commodities.
According to ReliefWeb, as much as 5.1 million Nigerians are estimated to be at high risk of being critically food insecure between June and November 2021. This situation is exacerbated by the second wave of COVID-19 in which Borno, Adamawa, Yobe States (Boko Haram hotspots) have recorded new cases.
What began as localised clashes between farmers and herders over access to land has degenerated into a major conflict and loss of lives across the north. In late 2020, dozens of rice farmers were massacred in Borno State.
According to the Global Terrorism Index, Nigeria is the third most terrorised country in the world, after Afghanistan and Iraq. Total terror-related deaths were estimated at 1,245 in 2019 and 1,606 in 2020. Total deaths are estimated at 22,441 since 2001.
According to an email sent from the office of the vice president to Bloomberg, it stated that “the Boko Haram insurgency has caused $9 billion of damage in six northern Nigerian states since 2011.”
The frequency of these attacks suggests that the battle against the insurgents is far from over. Although military offensive strategies have made significant headway in crippling Boko Haram’s activities, the group, however, appears relentless, and has maintained intermittent attacks and kidnapping.
President Muhammadu Buhari has made a specific commitment to combat terrorism, but the recent intensified efforts by Boko Haram suggest the goal of restoring peace to the northern region is still a far reach.
Nigeria’s minister of power, Aliyu Abubakar at a town hall meeting in Maiduguri on Thursday stated that the Transmission Company of Nigeria (TCN) lost N1.7 billion in nine months owing to vandalism of electricity infrastructure in Maiduguri and environs. He added that in one month, TCN lost an average of N139 million on the wheeling charges and energy lost in the area.
“This misappropriation of funds to vandalised projects rather than our citizens is what is driving the country’s poverty level to record highs,” Abubakar stated.
Data from the Nigerian Bureau of Statistics (NBS) revealed that Nigeria spent N258.3bn on wheat importation in the first three months of 2021. Recent reports indicate that efforts at boosting local wheat production in recent years have been undermined by the Boko Haram insurgency in the North-Eastern region of the country, as wheat farmers in Borno, the country’s major producing state have abandoned their farmlands and fled to other regions for safety.
President of the Wheat Growers Association of Nigeria noted that the insurgency in the North-Eastern region has been a major setback to efforts at increasing wheat production, noting that Borno alone contributed 30 percent to the country’s total output before the insurgency but now contributes nothing.
Nigeria remains a net importer of wheat, though there exists a 5 percent tariff on wheat imports, plus an additional 15 percent levy for the national wheat development programme.
Borno, Bauchi, Yobe, Kano, Jigawa, and Zamfara States are major wheat producers and these states are currently undergoing military operations in the fight against terrorists and bandits. These restrictions make it difficult for farmers to access their farms. These unfortunate events have led to a spike in food prices reflected in the food inflation rate and by extension headline inflation.