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News & Blog > Blogs: "Perspectives, Provocations & Initiatives" > The Economic Cost of Nigeria's Insecurity, What Must We Do?

The Economic Cost of Nigeria's Insecurity, What Must We Do?

IDS alum Olusola Owonikoko (MAGlob10) shares his thoughts on how Nigeria's insecurity is damaging the country's developmental progress.
Image: istock 956329618
Image: istock 956329618

In mid-April 2021, Twitter CEO, Jack Dorsey, announced that his company will set up its first Africa base in Ghana.

The announcement sparked fierce arguments amongst and between Nigerians and Ghanaians; reigniting the old rivalry between the two West African countries.

Twitter's investment decision

Millions of Nigerians perceive Twitter's move as a snub to Africa’s largest economy and a huge loss to its fledgling tech arena. Although their anger was not entirely justified, the stats help explain why it was valid.

According to the non-profit fact checking organisation, Africa Check, Nigeria has a little over 3 million active Twitter users today. That ranks it above South Africa (2.3 million), Kenya (1.09 million) and Ethiopia (about 139,600) and of course, Ghana who has about 695,200 active users. Number of local active users could influence one's choice of business base but it cannot be the sole metric.

As though preempting the ensuing debates, Twitter explained its stance, describing Ghana as "a champion for democracy, a supporter of free speech, online freedom, and the Open Internet."

Twitter’s decision left a bitter taste with many tech-enlightened Nigerians and it won’t be the only company to thread a path away from Nigeria.

Other foreign investors

In July 2015, Facebook chose Johannesburg, South Africa, as its first African hub. Over the years, other multinationals such as Michelin, Fan Milk, Shoprite, Exide Batteries, Berec Batteries, Tate and Lyle, amongst others, have either moved their operations out of Nigeria completely or substantially.

The Manufacturers Association of Nigeria revealed that, between 1999 and 2009, 38 major textile companies closed shop in Nigeria. Perhaps the loudest of those shutdowns happened in 2018 when Procter & Gamble, closed its $300 million plant in Ogun State. Reports say that it operated for one year and shut down “due to high cost of importing raw materials, insecurity and unfriendly government regulations.”

Procter & Gamble is not the only big whale to abandon Nigeria. Between 2009 and 2019, major oil firms such as ExxonMobil, Shell, Chevron, Total and ENI have sold about 45% of their onshore assets valued at about $10 billion to local interest groups. These escapist deals, experts claim, have left several local commercial banks dangerously exposed.

Now, oil and gas investors who want to continue their business in Africa are looking elsewhere; Namibia, Angola, Senegal, Mauritania, Mozambique, Algeria, Egypt and neighbouring Niger republic. It was no surprise that Foreign Direct Investment (FDI) dropped drastically in 2020, and reports attributed the sharp drop to insecurity.

Foreign investors can weather the economic hurdles of doing business in Nigeria, but not all have the patience and gall to bear insecurity and its ripple effects. And Nigeria has a lot of that; deadly clashes, killings and kidnappings.

Insecurity in Nigeria

In December 2020, 344 male students were kidnapped from their hostels in Government Science Secondary School, Kankara, Katsina State. Analysts called the incident a daring act by the bandits because Kankara was only a few kilometres away from where President Muhammadu Buhari was vacationing.

A few weeks before Kankara, Boko Haram terrorists claimed responsibility for killing over 100 rice farmers in Borno State. They accused the farmers of cooperating with the Nigerian military. This came on the heels of another incident where Boko Haram beheaded over forty farmers in Borno.

Attacks on schools and farms may seem like random, isolated incidents without future repercussions. But when we plot the “reality graph,” it is easy to tell what these incidents portend for the Nigerian economy.

I once heard Nigerians argue that the government is making giant strides in other areas and insecurity is only a small dent in the armour. That is narrow thinking, to say the least. Anyone who understands the dynamics of national development knows that development is a super-connected, sensitive algorithm. What affects one variable will ripple through the entire system.

Our lingering insecurity is not just a dent in the armour. It is a leak that sabotages our collective effort in all other areas, especially our economy. Whether we realise it or not, insecurity is costing us in more frontiers than we are willing to acknowledge. It has a collateral effect on every index on our development table.

Insecurity & dwindling foreign direct investment

Insecurity, real or perceived, can shoo away foreign monies seeking perching space in Nigeria.

This is two-fold. First, there is the real insecurity on the ground which cannot be doubted. Second, there is widespread reportage of these events by the media which paints an ugly picture for anyone thinking of moving business to Nigeria. 

Worse of all is when foreign investors watch in shock how weak and ineffective our government institutions can be in the face of insecurity.

The United Nations Conference on Trade and Development (UNCTAD), reported that Nigeria's annual FDI [foreign direct investment] from 2005-2007 averaged $5.3 billion. However, that figure dropped to $3.3 billion from 2015-2019; a period known for widespread insecurity and killings.

Insecurity is a major factor in making and continuing to make Nigeria unattractive for foreign investment. Other factors include; dysfunctional policies, decaying transport infrastructure, unreliable electricity supply, rigged judicial system, and multiple exchange rates of the Central Bank of Nigeria.

Insecurity & disrupted economic activities

The highest employer of labour in any functioning economy is the private sector. When pervasive insecurity cripples businesses or their operations around the country, they switch to survival mode. The most obvious being retrenchments.

Northeastern Nigeria, for instance, has seen the death of whole businesses. Business owners are forced to abandon their hard-earned investments and flee their homes. Those whose relatives are caught in the web of kidnapping are forced to empty their life’s savings to pay a ransom.

Others who have no place to go become Internally Displaced Persons (IDPs) unable to contribute to the economy. The government is then forced to cough out billions of Naira (currency of Nigeria)—that would have been channelled into capital projects—to cater for them. Put together, these factors put a heavy strain on the functioning part of the economy. But that’s not all.

Insecurity & food

The continual attacks on farms has sent food prices skyrocketing. The news is replete with episodes of herdsmen-farmers clashes in Benue State and other parts of the Middlebelt. The result? Farmers cannot access their products and so cannot supply the market.

This was the case in late 2020 when the price of food commodities such as onions shot to unprecedented levels. Recently, President Muhammadu Buhari assured Nigerians that his administration would maximize available resources to preserve the nation’s food security against assaults by bandits.

However, that does little to remedy the damage done to food security and the commodities market. Put together, these factors smear the overall progress Nigeria seems to be making in other areas.

Is dialogue the way forward?

Nigeria's insecurity did not reach this point in a day. It took years of neglect, marginalisation, lip service, lopsided policies and carelessness to achieve such a feat.

The way up, they say, is down. We must go back to where we got it wrong. It is ridiculous to think that the use of force will quell the ongoing agitations. The underpinnings of Nigeria’s insecurity are beyond what firepower can solve. In my opinion, the best way forward is dialogue.

It will take a while to dig through the multilayered frustrations of the past. Nevertheless, it is necessary. I support with the proposition of the Southeast governors who recently called on the President to “convoke a national dialogue”.

Also, I remain committed to Nigeria’s unity but I consider the call for restructuring to be a valid one. The outcome of the last Confab held in 2014 provides a near-perfect blueprint for the Nigerian federation on tackling insecurity. Implementing this resolution means the creation of state police, reviewing the revenue allocation formula in favour of state governments and the creation of other lacking institutions, while closing moribund, revenue-draining ones.

When Nigeria becomes like the Ghana that Twitter described as “a supporter of free speech, online freedom, and the Open Internet;” when government weighs the long-term impact of its policies on individuals and businesses before running to press; and when we respect the rule of law, tech giants like Twitter will no longer “snub” us for other African states.

Olusola Owonikoko is a development practitioner, and the founder of Project Enable Africa. He shares his thoughts on development issues on Twitter via (@SolaOwonikoko), LinkedIn, and Medium (handle: Olusola Owonikoko).

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