The Economic Cost of Social Insecurity in Nigeria


Wednesday, April 11, 2018 /12:50PM /FDC  

Nigeria has been marred by social unrest, including Boko Haram terrorism9 and herdsmen attacks10 just to mention a few. As a result of this unrest, the country ranked 149th out of 163 countries on the Global Peace Index in 2017.11 The impacts are broad: agricultural production has been devastated, public infra-structure such as schools, hospitals and bridges have suffered significant damage, and the loss of life and mass displacement of people are astounding. Yet, security spending in the 2018 budget is $1.58 billion, which translates to a paltry $8 per Ni-gerian.12 Evidence from other economies such as Germany, Japan and Botswana, with relatively peaceful environments, suggests that this is low for a country of Nigeria’s population. It is also low compared to the global average. Global total defense spending is expected to reach $1.76 trillion in 2018, translating to $220 per person.13 Indeed, there is a need for more robust defense spending to improve the security condition of the country, which would in turn contain the economic costs of unrest and support economic activities.

Cost of Insecurity to Nigerians and the Nigerian Economy
On the Global Terrorism Index Rankings in 2017, Nigeria ranked 1st in Africa and 3rd globally, largely due to the activities of Boko Ha-ram and herdsmen attacks.14 At least 15 out of Nigeria’s 36 states are currently experiencing violence and upheaval from these two groups. Boko Haram operates predominantly in the north eastern part of the country (and is also active in Chad, Niger and northern Cameroon). The herdsmen predominately attack in the southern region of the country. These violent events exist alongside south-south clashes among rival cults and militant at-tacks targeted at crude oil facilities.

The 15 states high-lighted in the map are mainly agrarian economies, representing approximately 47% of Nigeria’s total land mass and 32.5% of its GDP.15 Insecurity in these regions disrupts economic activity, particularly agricultural activities, and slows aggregate out-put growth in the economy. Meanwhile, Nigeria’s Chief of Army Staff, Tukur Buratai, has estimated that the economic impact of Boko Haram activities in the north east has cost the country N274.5bn ($9bn), with the loss of agricultural production put at N107bn ($3.5bn).16 This loss to agricultural production might have explained the reason for the decline in Nigeria’s total output of commodities such as cowpea, wheat and groundnut which are predominantly produced in the north east. As of 2016, the output levels of these key agricultural commodities were below 2010 levels.

Proshare Nigeria Pvt. Ltd.

As for the impact of the herdsman attacks, there have been media reports that farms have been destroyed, crops have been lost and the incentive to plant again in these areas has declined. These effects could translate to deepening poverty and food in-security. Insecurity results in damage to critical infrastructure such as schools, hospitals and bridges. Boko Haram has carried out suicide bombing attacks on schools, markets and car parks among other places.18 while these attacks continue, more of Nigeria’s infrastructure is poised for destruction.

Furthermore, insecurity has displaced about 1.96 million people resulting in extreme pressures on those who have been displaced and on the federal and state governments that must provide humanitarian assistance.19 According to the Minister of State for Budget and National Planning, Zainab Ahmed, the federal government and the six north-east states spent $6.4bn on interventions and humanitarian service in 2016 and 2017.20 This translates to an average of $3.2bn per an-num. It also represents about 8% of combined spending by the federal and state governments in the country. Governments have also had to sustain this expenditure amid unemployment and other infrastructural challenges that require huge fiscal spending.

Given these huge economic costs of insecurity, the Nigerian defense sector is likely being underfunded. This is reflected in low staff strength, weak surveillance system, and a paucity of arms and ammunitions. Ac-cording to the Institute for Economics and Peace, Nigeria had a relatively small military and private security sector in 2016. The organization noted that there are 219 police officers for every 100,000 Nigerians, significantly below both the global median of 300, and the sub-Saharan Africa average of 268.21 Similarly, Boko Haram especially has been alleged to possess more sophisticated arms than the Nigerian military. Indeed, the paltry $8 per capita spending on defense has made containing insecurity operations more diffi-cult.22

By comparison, Germany, with a population of 83 million people, spent an equivalent of $44bn on its defense sector in 2017, amounting to a per capita amount of $530. As of 2017, the country was ranked the world’s 16th most peaceful country on the Global Peace Index. In Asia, Japan - a country with population of about 127 million - expects to spend $46.5bn on defense in 2018. This translates to $366 per head. The country is ranked as the world’s 10th most peaceful country on the Global Peace Index, compared to Nigeria’s ranking of 149th. On the Global Terrorism Index, the country is ranked 54th, better than Nigeria’s 3rd position.

Within the continent, Botswana, Africa’s most peaceful country, appropriates the second largest share of its total spending to defense. In 2018, the country is projected to spend P2.78 billion pulas ($294mn) on de-fense.25 Given a population of about 2.25 million people, the country would spend approximately $130 per capita on security. Also noteworthy, Botswana’s police ranked the best in Africa on the World Internal and Security Police Index, while Nigeria’s police ranked the worst.

Nigeria needs in-creased defense spending (albeit with a close monitoring on spending to avoid mismanagement) to enhance the country’s arms and ammunitions, increases its number of armed personnel and train them efficiently. Higher recurrent spending in form of improved salaries may also boost motivation and improve performance amongst security personnel. Together, both a stronger arsenal and motivated defense personnel could do a lot more to contain insecurity. However, should the government decide to sustain its relatively low defense spending in the country, the impact of the defense sector to combat insecurity is poised to be limited and the continued negative impacts on the economy, infrastructure and Nigeria’s population are set to persist.

Proshare Nigeria Pvt. Ltd.

Related News

  1. Toward a Healthier Current Account
  2. Inflation to Plunge Further to 13.5% in March – FDC
  3. Nigerian Economy is on Track to Post an Improved Growth in Q1 of 2018 - GTI Capital
  4. Determinants of FDI and FPI Volatility: An E-GARCH Approach
  5. Inflation Rate to Drop Further to 13.49% in March 2018
  6. Talking Economics and Thinking Politics – LBS EBS – April 2018
  7. Nigeria PMI - Another Steady Expansion in March 2018
  8. A Modest Recovery in the FAAC Distribution
  9. PMI Reading No 60: Strong, and Broad-based
  10. Manufacturing PMI Stands at 56.7% in March 2018 from 56.3% in February 2018
  11. FAAC Disburses N635.55bn in February 2018 - NBS
  12. Textile, Apparel and Footwear Sub-sector Remains 2nd Largest Contributor to Nigeria’s Manufacturing
  13. Nigeria - Oil Dependence Undermines Otherwise Sustainable Fiscal Position
  14. Addressing Nigeria’s Poverty Level Through Its Health System
  15. External Debt Sustainability: Impact on Nigeria
  16. Markets Fret About America’s Turn Towards Protectionism
  17. Nigeria- Economic Recovery Remains Fragile
  18. Lagos State Has The Highest Domestic and Foreign Debts as at December 2017 - NBS
Related News