Insecurity and Economic Growth in Nigeria: A Diagnostic Review – Bright Enakhe Onime

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Summary: It should come as no surprise that insecurity has a significant impact on the economy. According to the study, insecurity impacts economic growth by drying up investments, rising unemployment, and reducing government revenue. Despite these consequences, government spending on internal security has not increased in tandem with the hydra-headed problem. Increased capital expenditure on internal security is required while policies should be created and targeted to alleviate the economic implications of insecurity.


Abstract

This paper examines the effect of insecurity on economic growth in Nigeria. Apart from its direct effect on the populace, it also affects the economy. Using elements of descriptive qualitative analysis and data from secondary sources, the paper analyzed its effect on some economic parameters. The analysis showed that insecurity affects economic growth by drying-out investments, increases unemployment and dwindles government revenue, amongst others. Despite these effects, government capital expenditure on internal security did not grow astronomically to match the hydra-headed problem. This paper therefore recommended an increase in capital expenditure on internal security and concludes with a discussion of some policies to be designed and targeted at addressing the economic effects of insecurity.

Introduction

Insecurity in Nigeria has reached an alarming proportion showing its ugly head in various facets of our national life. Lives are lost on daily basis, population depleted, businesses in comatose, investments are nose-diving, multinationals closing shops and vacating the country, unemployment soaring and the populace in fears. Clearly, it poses a threat to governance and economic growth in troubled nations. According to Stewart (2004), the economic cost of insecurity are enormous. People who joined the fighting forces, who are killed or flee, can no longer work productively; schools, power stations, and roads that are destroyed reduced the productive capacity of the economy. Further, displacement of people reduces the production of exports, thereby reducing foreign exchange earnings, import potentials and consequently further constraining output, leading to a decline in employment and earnings.

The menace remains a threat to governance and economic growth in Nigeria. Government by their inaction has proved to be unable to solely secure its citizens. Despite government’s burgeoning recurrent expenditure on internal security both at the National and State levels, individuals in their various rights, work places and houses spend heavily to provide security for their personal lives and properties. Despite these efforts, the menace keep exacerbating. Thus in almost all parts of the country, there exist some levels of insecurity. We have seen instances of ethnic conflicts in some part of the North, kidnapping in almost all parts of the country, but prominent in South- South and West, militancy and pipeline vandalisation activities in the Niger delta, terrorism and religious extremism by Boko Haram in North East, agitations for self-determination by IPOB (Indigenous People of Biafra) and MASSOB (Movement for the Actualization of the Sovereign State of Biafra) in South East, herdsmen disturbances in the North and Central, ritual killings in the South West and East and other political and economic disturbances. I posits that these disturbances and insecurities in its various forms affects economic growth.

Thus, it has been observed that in areas were insecurity are prone in Nigeria, economic activities and variables have been lagging behind. For instance, in the North East of Nigeria where Boko Haram has held sway, the area has been deserted, businesses including informal sector have been affected, unemployment have soared, Internally displaced persons (IDPs) and camps have suddenly emerged, State internally generated revenue have plummeted etc. Again, in the Niger Delta area of Nigeria where militant’s attack on oil installations and pipeline vandalisation is persistent, a number of MNCs have closed shop or relocated their offices from the area, the country has been unable to meet its oil production quota, unemployment has skyrocketed, oil exports nosedived, foreign exchange dropped and the cost of doing business in the area have increased. So it is in the other parts of the country where insecurity strive.

In response, the federal government through its annual budgets, continue to vote huge allocation to the recurrent component of internal security, military personnel and apparatus have been asked to relocate their bases to the troubled areas to quell crises, and some States have signed into law the Anti-kidnapping Act while the National assembly passed the Anti- Terrorism Act in 2011. Despite these measures, economic indices have not improved and the level of insecurity in the country is still high. A confirmation of this is the low ranking of Nigeria in the Global Peace Index (GPI, 2012) and the current recession the country has been thrown into.

The aim of this paper therefore is to review the various ways in which insecurity affects economic growth in Nigeria. To achieve this, the remaining section of this paper shall be organized as follows. Section two shall examine existing literature on subject, section three looks at the patterns and dimensions of insecurity in the country, section four considers the research method, section five provides an analysis of government expenditure on internal security, section six examined how insecurity affects economic growth, section seven tries to proffer a way out of the conundrum while section eight concludes the study.

Literature review

The devastating effects of insecurity on economic growth was recognized early enough in the literature. UNDP (1994), Beland (2005); Collier Paul (2006); Achumba and Ighomereho (2013); Omoyibo and Akpomera (2013); Stewart (2004); Aderoju (2007) amongst others. Most of this studies however examined the subject from a political-socio economic perspective, only a few purely economic study of the subject exist in the literature. UNDP (1994) defined human security with a view to understanding what insecurity entails. According to it, human security means, first, safety from such chronic threats as hunger, disease and repression. And second, it means protection from sudden and hurtful disruptions in the patterns of daily life – whether in homes, in jobs or in communities. The report identified seven elements that makes up human security: (i) Economic security; (ii) Food security; (iii) Health security; (iv) Environmental security; (v) Personal security; (vi) Community security; and (vii) Political security. Anything short of this definition and elements, amounts to insecurity.

According to Beland (2005) insecurity entails lack of protection from crime (being unsafe) and lack of freedom from psychological harm (unprotected from emotional stress resulting from paucity of assurance that an individual is accepted, has opportunity and choices to fulfill his or her own potentials including freedom from fear. As Achumba and Ighomereho (2013) puts it, those affected by insecurity are not only uncertain or unaware of what would happen but they are also not able to stop it or protect themselves when it happens. In respect of the factors responsible for insecurity and conflicts, Collier (2006) stressed that countries which have a substantial share of their income (GDP) coming from the export of primary commodities are radically more at risk of conflict. The most dangerous level of primary commodity dependence is 26% of GDP. According to him, conflicts and insecurity is concentrated in countries with little education, fast population growth and economic decline. This was also the views expressed by Aderoju (2007).

The effect of Insecurity on economic growth has been described to be negative. Stewart (2004) analyzed the effect of conflict and insecurity on development for twenty five countries between 1960 – 1995 and found that economic growth was almost always affected, agricultural sector was badly hit, exports were negative, production fell, there was a shift from international to domestic markets, imports went up dominated by military expenditure and essential consumption goods, usually leading to a shortage of foreign exchange for economic inputs., consumption per head fell, government revenue as a share of GDP mostly fell and foreign and private investments including government investment fell. This was further corroborated in SIPRI yearbook 2015, were they observed that threats to security can have socio- economic roots, including contests over natural resources, spillover effects of environmental degradation, economic and social inequalities, economic and political migration, natural disasters, among others.

On the whole, this study is a departure from most of the existing literature as it examines the effect of insecurity on economy growth from a purely economic perspective.

Patterns and Dimensions of Insecurity

Nigeria is currently bedeviled by a plethora of civil unrests and insecurities including but not limited to the following;

  • Armed robbery
  • Kidnapping and Ritual killings
  • High profile murder and political assassinations
  • Herdsmen disturbances and clashes with farmers
  • Violent agitations for resource control especially in Niger Delta of Nigeria
  • Non-violent agitations for self-determination as observed in South East Nigeria
  • Terrorist attacks epitomized by Boko Haram in North East Nigeria
  • Ethnic and Religious tensions
  • Communal and land disputes typified by Aguleri-Umuleri crises in Anambra State.
  • Political/Post Election violence

In their own various ways, each dimensions of insecurity poses different risk to the polity. In recent times, incidences of kidnapping has gained prominence. The most celebrated of this cases of kidnapping was the 276 Chibok girls that were kidnapped from their school in Borno State and the millionaire kidnapper (Evans) case in Lagos. In respect of non-violent agitations for self-determination, the case of the Movement for the actualization of the Sovereign State of Biafra (MASSOB) and Indigenous People of Biafia (IPOB) stands out. Violent agitators for resource control especially in Niger Delta includes the activities of different militia groups including MEND, Ijaw Youth Council (IYC), Egbesu, Movement for the survival of Ogoni People (MOSOP) etc. In respect of militancy struggle in the Niger Delta, Aderoju (2007) attributes this to the ‘resource curse’, the tendency of natural resource dependence to cause slow growth, greater inequality and poverty for a larger majority of a country’s population.

A number of reasons have been adduced for insecurity in Nigeria, including but not limited to the over dependence on oil, export of primary commodities, social inequality, state failure, human right violations, resource predation, corruption, feeling of marginalization and alienation etc. Policy to tackle insecurity therefore must first address these root causes of insecurity in other to be successful.

Effect on Agriculture

The agricultural sector was never spared during uprising but particularly badly hit, especially as people were forced to move in the course of the conflicts. For instance, due to herdsmen’s clashes in part of Benue, Kogi and Enugu State that resulted in destruction of farmlands, farm produce in those areas were low causing an increase in the prices of food items during the period. Further, agricultural activities has been brought to a complete halt in Borno State since the beginning of Boko Haram disturbances in that area. This is so because the people in some areas of the State have since relocated from their homes and farm land to internally displaced person’s (IDP) camps for safety.

Effect on the Informal Sector

Insecurity causes sectoral shifts with a switch to subsistence and informal activities, including simple manufacturing production especially in North East and Niger Delta of Nigeria. Here, a number of companies operating in the area were forced to either scale down their operations or closed shop altogether due to the activities of Boko Haram and Militants. This resulted in unemployment and those disengaged found solace in the informal sector. Available data from the National Bureau of Statistics (NBS) showed that new jobs created in 2015 stood at 1,039,128, representing a 22.3 per cent increase, compared with 849,567 jobs created in 2014. The increase in job-creation was driven mainly by informal sector jobs, which accounted for 90.2 per cent of total, with the formal and public sectors accounting for only 8.8 and 1.0 per cent, respectively.

Effect on Foreign Investment

Foreign Direct Investment (FDI) are investments targeted at building new factories or investing in actual production activities which creates jobs. Achumba and Ighomereho (2013) noted that Insecurity discourages investment as it makes investment unattractive to business people. This is because it increases the cost of doing business either through direct loss of goods and properties or the cost of taking precautions against business risks and uncertainty. These costs could have a negative impact on business development and progress.

Dealing With Insecurity In Nigeria

The severity and hardships insecurity have caused the nation calls for a concerted and well-articulated security policies to address the hydra-headed problem. Analyst have suggested the need to understand the causes of insecurity so as to target the right solution to addressing the problem. Such solutions must be such that should be long lasting and all-encompassing to avoid a recurrence.

According to Stan Flavius (2004), Contemporary intra-state conflicts cannot be prevented, resolved, or managed exclusively through preventive diplomacy, political negotiations, peacemaking, peacekeeping, and the use of force. They have complex causes (social inequality, state failure, human rights violations, resource predation, etc.) which require correlated international assistance in areas including sustainable economic growth, good governance, human rights protection, and environmental preservation.

This has become very important because of the case of the Niger-Delta militants that were granted amnesty but returned to vandalize oil pipelines and distort the Nation’s inability to meet its oil production quota. Clearly, insecurity affects economic growth. Policies to target insecurity must address its root cause. The following are recommended;

  1. Need for government to use revenue from primary commodity exports to fund effective basic delivery
  2. Need for government to diversify the economy away from dependence upon primary commodities
  3. Increase in government expenditure on internal security both in the recurrent and especially on the capital component.
  4. Acceleration of the pace of development and good governance.
  5. A concerted and collaborative efforts by all security agencies of government to combat the menace of insecurity.

Conclusion

On the whole, a Nation replete with insecurity can never attract investments nor grow its economy. This study examined the effect of insecurity on economic growth and considered the likely effect of such insecurity on economic variables such as investment, employment, exports, government revenue and the informal sector.

Trends have shown evidently that insecurity is capable of drying-out investment, increasing unemployment, reducing export receipts and government revenue and by implication slows economic growth. Policies and Strategies to combat insecurity in Nigeria must target the population by eliminating or reducing to its barest minimum the massive loss of life in areas of violent activities, target oil production, exports and oil revenue by eliminating pipeline vandalisation activities, oil bunkering and militancy struggles in the Niger-Delta of Nigeria, target unemployment by creating enabling and peaceful environment for businesses to operate and for investments to strive.

Such policies and strategies must equally target the agricultural sector by reducing communal conflicts, herdsmen clashes and the destruction of farmlands and produce following from these clashes. Further, it should target foreign investments by creating an enabling environment for investment to strive, ensure peaceful and safe haven for MNCs to operate and do business and provide the requisite infrastructure that will attract new investments. Especially, it should target government expenditure by increasing budgetary allocations to both the recurrent and capital component of internal security.

In sum, whereas trend analysis was used to establish the relationship between insecurity and economic growth in this study, it is believed that a rigorous and more advanced empirical technique can be used to properly dimension the likelihood of effect between the dependent variable (insecurity) and the various explanatory variables in this study (including but not limited to investment, oil prices, exports, unemployment, inflation, government revenue, informal sector etc.). This should be the direction of future research.


Recommendation(s):

• Government revenue from imported goods must be used to fund effective basic delivery.
• The government should expand the economic system away from reliance on raw materials.
• Internal security spending should be increased by the government, both in terms of recurrent and capital expenditures.
• To combat the problem of insecurity, all government security agencies must work together in concert.


About the Author:

Bright Enakhe Onime – Doctoral Research Student, University of Port Harcourt, Nigeria

Source: European Scienticfic Journals

Keywords: Insecurity, Economic Growth, Conflict, Internal Security, Expenditure

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