Conflicts and issues around insecurity cost Nigeria $121 million in 2017, which was equivalent to 11 percent of the GDP in that year, according to a report by the Lagos Chamber of Commerce and Industry (LCCI) titled, ‘Insecurity in Nigeria: Implications for the Economy’.
“There is a strong correlation between insecurity and investment as insecurity creates a huge disincentive to investment,” the report says.
It further says that a majority of business operators in Africa perceive insecurity as a major constraint to investment.
Insecurity is a major issue that continues to hurt the Nigerian economy, including local producers and those involved in trading activities.
Nigeria is hard hit by kidnapping, armed robbery, assassination and theft, all of which have scared investors and affected businesses negatively.
Foreign Direct Investment (FDI) into Nigeria in 2014 stood at $2.28 billion, but five years later, it declined to $1.19 billion, growing at a negative rate of 15 percent. Firms exited the economy in the last four years on poor policy choices. In the first half (H1) of 2019, FDI fell further by 8 percent.
Apart from its impact on investments, the report says the impact of insecurity and conflicts on food and crop production is also huge as the violent conflicts have taken heavy tolls on the quality and quantity of farm produce.
The Manufacturers Association of Nigeria (MAN) highlights insecurity as one of the challenges of local manufacturers as many have relocated factories from insecure to secure locations.
“The insurgency, especially in the northern part of the country, and violent conflict occur most times in the rural areas and local communities where large proportions of food productions are carried out,” the report notes.
“Insecurity therefore obstructs production of food crops, livestock farming and stifles agro procession activities which can majorly be attributed to the displacement of the farming population, destruction of farm products among other things,” the report further says.
In its country report for Nigeria, the Food and Agriculture Organisation of the United Nations says that despite its position as one of the largest sectors, production hurdles have significantly stifled the performance of the Nigeria’s agric sector.
In terms of value, Nigeria has lost $10 billion in annual export opportunity from groundnut, palm oil, cocoa and cotton due to the continuous decline in the production of those commodities, the report discloses.
The report says that transportation is also affected as the wave of insecurity creates a sense of fear, causing a reduction in mobility which is necessary for business activities.
“Violent conflicts negatively affect transportation services particularly road transportation, which, in turn, constrains freight movement and haulage activities needed to move goods and services around the country,
“This, therefore, hampers distributive trade, tourism activities and other economic activities facilitated by road transportation as Nigeria is reported to have one of the world’s largest rates of kidnap for ransom cases. In the first quarter of 2019, over 685 cases of kidnapping were recorded,” the report says.
As a recommendation, the LCCI advises that the government should engage in aggressive use of modern technology in the fight against insecurity, ensure concrete and sustainable means of reducing youth unemployment, encourage activities that will stimulate investments and implement community policing.