A report by Agusto&Co has indicated that insecurity has hampered foreign direct investments (FDI) as well as depleting the economic prospects of Nigeria, revealing that last year’s FDI, which stood at $699 was the lowest in eight years.
The report, titled, “the Economics of Insecurity: Nigeria Rough Patch,” noted that the rising insecurity is also rooted in the increase in unemployment and rising poverty.
It also stated that the increased insecurity in Nigeria has coincided with rising poverty levels, with an estimated 83 million people which is 39 percent of the total population, living in extreme poverty, which is less than $2 per day as of April 2022.
According to the report: “The rising level of insecurity constitutes a major drag on investor confidence which is negative for FDI inflows. Nigeria recorded $699 million in FDI inflows in 2021, the lowest level since 2013. The country’s level of insecurity, and the implication for business activity, cannot be overstated.
“Heightened uncertainty and instability hinder business operations including production, marketing, and distribution. In many cases, the country’s security situation has resulted in the suspension of commercial operations and expansion plans, thereby increasing unemployment and poverty levels.”
It noted that lower-income earners are more vulnerable to reductions in power purchasing power, job losses, and a lack of access to basic financial services that can help mitigate disruptions during periods of conflict. Security concerns in the country have also hampered access to raw materials in certain locations thus disrupting production cycles and driving up costs.
“Many transportation and logistics providers are charging higher fees to specific regions, as security risks are being factored into the fares. According to the NBS, the average airfare charged for specified routes is up 28.26 percent in the last year while the average charge for intercity bus journeys is up 35.65 percent within the same period,” it states
Furthermore, on the impact of insecurity on the economic performance of Nigeria, it emphasised that in order to ensure sustainable long-term economic growth is closely tied to its national security.
It further stated: “The widespread insecurity in the country has led to the disruption of agricultural activities which is the largest employer of labour and the largest economic sector in the country at 25.9 percent of GDP in 2021.
“Agriculture also provides input for various manufacturing companies. Nigeria’s high food inflation rate, which stood at 17.2 percent in March 2022, is largely attributed to the increasing scourge of insecurity in the country’s Northern region. Communal clashes and banditry, in addition to the farmer-herder disputes, have raged unabated throughout Nigeria’s North-Central zone, spreading to neighbouring states including the South-West zone.”
“Insecurity has constrained the ability of many farmers to access their farmlands while some are forced to pay terrorist groups to gain access to their farmlands for planting and harvesting. This translates to suboptimal agricultural output, scarcity, and higher food prices. This eventually impedes our ability to attain self-sufficiency in food production which is fueling increased food importation and piling on the pressure on the external reserves,” it stated.
The report however recommended that tackling poverty and unemployment from their root causes is crucial to winning the war against terror adding, “While pro-poor growth strategies and social welfare are crucial to assuaging poverty, strengthening institutions and investing in infrastructure are key to stimulating investments that would support long-term economic growth and stimulate job creation.”