Impact of Terrorism on Nigeria’s Economic Growth from 1990-2023

Impact of Terrorism on Nigeria’s Economic Growth from 1990-2023

¹Obi Chinasa Ifeoma, ²Ezeanyeji, C i. ³Obi, C O.

¹Nnamdi Azikiwe University Awka, Nigeria

^2,3Chief Odumegwu Ojukwu University Igbariam, Anambra State, Nigeria

DOI: https://dx.doi.org/10.47772/IJRISS.2025.90400393

Received: 07 April 2025; Accepted: 14 April 2025; Published: 18 May 2025

ABSTRACT 

The study investigated the impact of terrorism on Nigeria’s economic growth from 1990-2023 by observing the extent of the impact of terrorism (TERR) and other variables such as capital stock (CPST), defense spending (DEFS), labour force participation rate (LFPR) and inflation (INFL) on economic growth of Nigeria. These variables were sourced from institute for economic and peace (IEP): Global economic index, and World Bank data portal. The study employed the Ordinary Least Square (OLS) regression but, with Auto-Regressive Distributive Lag (ARDL) model as the major tool for parameter estimations. The results of both the long run and short run ARDL models revealed both TERR and INFL having negative relationships with economic growth with TERR significant and INFL insignificant, implying that terrorism and inflation impact negatively on economic growth in Nigeria. The findings also showed a positive relationship between CPST, DEFS, LFPR and economic growth both in the long run and short run but, not significant in all cases. These variables impacted positively on economic growth in Nigeria. The study recommended thorough and strict monitoring of security fund disbursement, training of the labour force among others.

Keywords: Terrorism, government, Monetary, Economic, Growth,

INTRODUCTION

Economic growth is the primary goal of any responsible government and achievable through proper resources allocation to economic activities in the country. It entails a consistent rise in the production of goods, services and job opportunities, all aimed at improving the population’s financial well-being (Ogbulu & Torbira, 2012). Different activities contribute to economic growth of a nation covering total value of output and service produced in the country in a given period translating to the well-being of the nation. Economic growth is measured by various macroeconomic performances such as gross domestic product (GDP), gross national product (GNP), net national product (NNP) and national income (NI) and economic progress encompasses improved consumption, investments and international trade.

Stability measures put up by the government in order to achieve economic growth include central government budgets, prices stability, money supply and balance of payments (World Bank, 2023). Prateek (2017) explains that economic growth is one of the most important indicators of a healthy economy. One of the biggest impacts of long-term growth of a country is that it has a positive impact on national income and the level of employment which increases the standard of living. As the country’s GDP increases the more productive the country is, thus leading to increase employment and more income generation. This increases the wealth of the country and its population. Higher economic growth leads to extra tax income for government spending, which the government can use to develop the economy. This increase in income from tax payment could be possibly used to finance budget deficit. Additionally, as the population of a country grows the need for growth in output become imperative to keep pace with the increasing population hence, there will be competition for few jobs, over straining of public facilities and poverty might be the end result.

Rotimi, Naphtali and Irehin (2024) understood terrorism as an act of transferring aggression by an individual or some groups against others. This act involves the use of arms and ammunitions resulting in loss of lives. According to them terrorism can threaten the spatial peace of the affected region and their environment and its consequences could largely be detrimental to the social, economic and political well-being of the nation.

Studies such as Ifeanyi (2023), Abakpa and Tyokosu (2022), Adebayo (2022) among others have however affirmed that terrorism can inhibit the growth of an economy. Terrorism which is caused by insecurity has been seen to have harmful effect on economic growth of any country that experiences terrorism. It can affect economic output and growth by changing the size, nature and composition of economic production and labour force, as well as investment calculations of foreign and domestic investments (United Nations Development Programme, 2019). Looking at the effects of terrorism on some countries of the world, terrorism in Afghanistan caused the Afghan government to be taken over by Taliban which imposed severe restrictions on fundamental rights and access to civic public space. These measures seriously have severe implications on her economic growth. The widespread reports of rape, sexual abuse and torture of mainly Uyghurs in China are estimated to have placed 880,000 children, whose parents are allegedly detained or in exile, in state-run orphanages or boarding schools where Afghan government spends huge amount of money every year (Global Centre for the Responsibility to Protect, 2023).

Statement of the Problem

Economic growth and development is achievable and dependent on several economic factors including peace and security. When a nation’s territory is not peaceful and there crises, wars and conflict, people would not like to invest in such an environment despite that some few people take risk in investing in such environment. According to Osmond as reported by Rotimi et al (2024) the activities of terrorism has led to reduction in the labour force of Nigeria, people who could have contributed to the growth and development of the country are either kidnapped and released with huge ransom paid or kidnapped and killed even with ransom paid. Money paid for ransom are considered economic waste because they are unproductive.

Terrorism is a threat to economic progress of any nation and as it affects one sector especially a core or major sector like agriculture, it will definitely impact on economic growth of the country hindering welfare improvement and overall development. The menace has negatively impacted on major growth driving sectors in addition to agriculture such as mining, trade, and banking and the entire financial sector and governance. The effect has been a dwindling GDP as observed from 1960 up to 1971 even though it has been on the rice. Sule et al (2023).  Despite government efforts in restoring peace in the country the incidence of insecurity continues to be on the rise as there is massive intrusion into the act thus leading to death, destruction of properties and unnecessary loss of useful capital that are supposed to be used for productive ventures. The research investigated in the direction of the impact of terrorism on economic growth in Nigeria from 1990 to 2023.

Research Questions

From the stated problem above, the study is set to answer the following research questions:

What impact does terrorism have on economic growth in Nigeria?

Is the impact of capital stock on economic growth positive or negative?

How is labour force participation rate related to economic growth?

Does defense spending directly or indirectly impact on economic growth?

In what way does inflation affect economic growth?

Research Aim and Objectives

The broad objective of conducting this study is to examine the impact of terrorism on Nigeria’s economic growth. The following specific objectives of this study include;

Examine the impact capital stock on economic growth in Nigeria

Assess the relationship between labour force participation rate on economic growth

Investigate the direction of relationship between defense spending on economic growth

Find out the effect of inflation on economic growth

LITERATURE REVIEW

Conceptual Framework

Terrorism

The term terrorism is a violent armed rebellious group who practice guerrilla warfare from rural base to a larger authority if not controlled. (Fearon, & Laitin, 2003; Kalyvas & Balcells, 2010). According to World Health Organization (2002), it is an intentional use of physical force or power to cause harm against one-self, another person and against a group or community which results to death or injury or mental harm. It continues to be used interchangeably and inexactly with warfare such as irregular warfare, unconventional warfare, revolutionary and even terrorism. Moore (2007) further posits that “the inter-changeability of terms is understandable, given the diverse nature and adaptability of those who wage insurgency and the overlapping traits of these types of conflict”. A different scholar defined terrorism as a group whose aim of existence may have been out of government ignorance to their demand and then formulate to overthrow a constituted government through subversive means and armed conflict (Helleson, 2008). Terrorism is conceptualized in the case of this study using non-state conflict.

Akhin (2012) termed terrorism “as a threat to the development of a nation. It serves as a major factor that inhibits economic, political and social security of a nation as it discourages both local and foreign investments. Terrorism also reduces the quality of lives, destroys human and social capital, damages relationship between citizens and the states, undermines democracy, rule of law and the ability of the country to promote development”. Mukolu and Ogodor (2018) define terrorism as the incidences of armed robbery, kidnapping, theft, assassination, unemployment, high cost of living that affect the achievement of growth but then which the economy has little indirect control.

US Government (2012) defines terrorism as “a protracted political-military struggle directed towards subverting or displacing the legitimacy of a constituted government or occupying power and completely or partially controlling the resources of a territory through the use of irregular military forces and illegal political organizations. The common denominator for most insurgent groups is their objectives of gaining control of a population or a particular territory, including its resources. This objective differentiates terrorist groups from purely terrorist organizations. It is worth noting that identifying a movement as a terrorism does not convey a normative judgment on the legitimacy of the movement or its cause, the term terrorism is simply a description of the nature of the conflict. Terrorism is primarily a political competition for legitimacy, but the violent aspect of the struggle most often alerts observers to the terrorism’s existence. Terrorist warfare is characterized by a lack of front lines, sequenced battles, or campaigns; a protracted strategy, often lasting more than a decade; and unconventional military tactics, including guerrilla warfare, terrorism or ethnic cleansing. The distinction between civilians and combatants is blurred in terrorism, often resulting in proportionally higher civilian casualties than suffered in conventional conflicts. According to US Government, terrorisms can be categorized based on the goals of a terrorism. This are highlighted as follows;

1. Revolutionary Terrorisms: seek to replace the existing political order with an entirely different system, often entailing transformation of the economic and social structures.
2. Reformist Terrorisms: they do not aim to change the existing political order but instead, seek to compel the government to alter its policies or undertake political, economic, or social reforms.

Separatist Terrorisms: they seek independence for a specific region. In some cases, the region in question spans existing national boundaries.

Resistance Terrorisms: they seek to compel an occupying power to withdraw from a given territory.

Commercialist Terrorisms: they are motivated by the acquisition of wealth or material resources; political power is simply a tool for seizing and controlling access to the wealth.

Based on the focus of this study as it focuses on all the geo-political zones, the definition given by US Government (2012) serves as the working definition of this study. This is because the definition explicitly outlines terrorism and those conflicts that are categorized as terrorism, which captures all the insecurity in the six geo-political zones of Nigeria.

 Economic Growth

According to Jhingan (2004), economic growth refers to an improvement in individuals’ living standards coupled with a reduction in income inequalities. Dwivedi (2006) explains that economic growth is a sustained increase in per capita output or net national output over a long period of time. It implies that the rate of increase in total output must be greater than the rate of population growth. Todaro (2007) simplifies it as the gradual increase in a nation’s productive capacity. In broader terms, economic growth encompasses the rise in the total market value of goods and services produced within an economy during a specific period. Economic growth is also defined by Ogundipe and Oluwatobi (2010) as the steady process by which the productive capacity of a nation that brings about rising levels of national income and output is increased overtime. It must be sustained for the vicious circle of poverty to be broken in the developing nations of the world. International Monetary Fund (2012) refers to economic growth as the increase in the market value of goods and services produced in an economy over a period of time. Conventionally, it is measured as a percent rate of increase in real GDP.

According to CBN (2017), economic growth is the monetary value of goods and services produced in an economy during a period of time irrespective of the nationality of the people who produced the goods and services. It is calculated without making deductions for depreciation.  Prateek (2017) defines economic growth in an economy by an outward shift in its production possibility curve (PPC). Economic growth is measured by the increase in a country’s output or real gross domestic product (GDP) or gross national product (GNP). The gross domestic product of a country is the total value of all final goods and services produced within a country over a period of time. Therefore, an increase in GDP is the increase in a country’s production. Growth does not occur in isolation. Events in one country and region can have a significant effect on growth prospect in another. Economic growth is one of the most important indicators of a healthy economy. One of the biggest impacts of long-term growth of a country is that it has a positive impact on national income and the level of employment which increases the standard of living. As the country’s GDP is increasing, it is more productive which leads to more people being employed. This increases the wealth of the country and its population. Higher economic growth leads to extra tax income for government spending, which the government can use to develop the economy. This expansion can also be used to reduce budget deficit. Additionally, as the population of a country grows, it requires the growth to keep up its standard of living and wealth.

Kimberly (2018) defines economic growth as an increase in the production of goods and services over a specific period. To be most accurate, the measurement must remove the effect of inflation. Economic growth creates more profits for businesses. As a result, stock prices rise. That gives companies capital to invest and higher more employees. As more jobs are created, incomes rise. Consumers have more money to buy additional products and services. Purchases drive higher economic growth. For this reason, all countries want positive economic growth. This makes economic growth the most watched economic indicator.

Theoretical Literature Review

Relative Deprivation Theory.

The theory has been discussed and developed by various scholars over time, but its origins can be traced back to sociologist Samuel Stouffer’s work on “The American Soldier” during World War II. Later, the concept of relative deprivation was further elaborated upon by social psychologists like J.C. Turner and Henri Tajfel. The theory suggests that individuals or groups compare their situation with that of others and a feeling of dissatisfaction and frustration arises when they perceive themselves as unfairly worse off. This comparison leads to violence and terrorism mainly because of a collective discontent caused by a sense of relative deprivation.

The basic assumption of the theory includes the existence of social comparison whereby people compare their circumstances with those of others, both in their immediate reference group and in society at large; the assumption of relative deprivation arising after the social comparison and the individual or groups perceive that they are unfairly worse off and lastly, the theory assumes the need for a motivation for action which can be in various forms of collective action, including social movements, protests, and even violent conflict. Walter (1966) defined relative deprivation in three (3) terms. First, a feeling of comparison with other individuals must surface. Without individuals or groups believing that their legitimate rights have been denied or marginalized, they may stir some sought of lack of trust, antagonism and anger towards the party responsible for their deprivation (Ewetan & Urhie, 2014). The frustration-aggression mechanism in this sense is analogous in nature such that a frustrated man is disposed to anger which could force violence as would be proportional to his frustration (Gurr, 1970). The theory was criticized for over simplification given that the theory’s causal relationship is complex. Most importantly, critics argue that the measurement of relative deprivation is challenging, as it’s based on subjective perceptions and comparisons.

The theory is of immense importance as it helps to explain how sect activity and violence occur as a result of marginalization, deprivation, frustration, aggression and unequal access to economic opportunities while it offers insights into the dynamics of insurgency and economic growth, influencing behaviour and outcomes. The Boko Haram group started with a peaceful protest but was snuffed out by heavy-handed military and police brutally and to make matters worse; their leader was killed in the process. These experiences reinforced the group’s feelings of deprivation, frustration and anger with aggressiveness responded with violence as a means to fight for their belief, rights and vengeance for the loss of their loved ones (Chris, 2020). From an economic standpoint, relative deprivation can have implications for social stability and economic growth. If a significant portion of the population perceives itself as unfairly deprived, it can lead to social unrest and disrupt economic activities, potentially hindering growth. Addressing relative deprivation can contribute to more inclusive and sustainable economic development

Frustration-Aggression Theory

This theory was initially developed by Dollard et al. (1939) and modified by Berkowitz (1963). The theory is based on the general premise that all humans have basic needs (food, shelter and clothing) that they seek to fulfill and that any blockade to the fulfillment of these needs by individuals or groups elicits violent responses (Berkowitz, 1963). This is to say that ‘frustration is the resulting factor of aggression’. Before one can examine this theory, it is of intrinsic importance to define the terms frustration and aggression. Frustration is when an individual feels tension that his/her efforts are blocked, while aggression is the reactive response to frustration which can come in the form of anger, violence or other involuntary responses that may be harmful or hurtful to the offender (Dollard et al., 1939). According to Dollard et al. (1939), an aggressive response to frustration is the desire to hurt or injure others. This aggression manifestation is confounded on the basis of aiming to harm another, which defense or hostility is part of its measures.

This theory proffers an explanation for violent behaviour emanating from the inability of the government and or other stakeholders in society to fulfill needs. The frustration-aggression theory assumes that aggression is not just undertaken as a natural reaction or instinct as realists and biological theorists assume, but that it is the outcome of frustration. In any situation where the legitimate desires of an individual or group are denied by the way society is structured, the feeling of disappointment may lead such persons or group of persons to express their anger through violence that will be directed at those they hold responsible for their predicaments or people related to them (directly or indirectly). The theory also assumes that insurgence is manifested out of frustration on account of national political, religious and economic systems (Utibe, 2016). The theory was criticized on several bases such as the over-simplification of the relationship between frustration and aggression, neglecting the complex psychological and situational factors that can influence aggressive behavior. Critics also argue that frustration does not always lead to aggression and that individual difference might affect their responses which include other behaviors like withdrawal, problem-solving, or seeking alternative goals. One other criticism leveled against the Frustration Aggression Theory is the politicization of religious traditions and the radicalization of religious communities especially in times economic decay, social integration or state collapse.

The theory is being studied to attain how frustration always leads to aggression. The source of frustration cannot be challenged, the aggression results to revolts. This leads to riots and revolutions. An unemployed man is a poor man because he feels like one who is deprived of the right to work, earning a living and not just that, he is deprived of his right of attaining a goal in life. Such a frustrating state can push one into forming groups of like minds in order to survive the situation at hand. Some may end up forming an entrepreneurship group or a violent group as the case may be. (Jones, 2005). This case is not far from our course of study Boko Haram who were groups of like minds and agitating for a better life, Originally, the group was frustrated by their unemployment rate and standard of living that was why they cried out to the government for intervention but instead of dialogue, the sect was pushed to aggression the moment their leader was killed in 2009. The sect resulting aggression took effect on 2010 in which year they started launching their attacks on government, lives and properties following subsequent years. Their frustration which led to aggressiveness was a resulting factor of relative depression.

In general, this theory is significant to this study as it further helps us to study how frustration-aggression can emanate violence. More so, the theory explains how frustrated persons are readily available to be recruited under the auspice of Boko Haram as destructive political agents for indiscriminate and sporadic suicide bombings in Northern Nigeria which is a great impediment to economic activities and growth in the country.

Endogenous Growth Theory-Lucas and Romer

This theory is credited to Paul Romer and Robert Lucas in the 1980s and 1990s. The endogenous growth theory is an economic theory that focuses on explaining long-term economic growth as an internally driven process that is influenced by various factors within an economy, rather than being solely dependent on external factors like capital accumulation and technological progress (Romer, 1986). The theory suggests that economic growth is not just a result of exogenous factors (external shocks), but also a result of factors that are endogenous (internal) to the economy itself.

Lucas (1988) was first to suggests that human capital model serves as the engine of economic growth. He employed a two-sector model in which he stated that a final output is a function of two major variable inputs which are human and physical capital. Firstly, schooling model, the growth of an economy is dependent on how government allocates its time on current investment on human capital and human capital accumulation. In the second, the learning-by-doing model, the growth of an economy through human capital is determined by the effort devoted to the production of goods and services. Later, Romer (1986) who joined Lucas in his argument emphasized the importance of human capital in the development of new knowledge and technology. He said that if government invests in human capital, labour will acquire the skills, knowledge and other potentials needed for productivity and these potentials would be transmitted to technological application in harvesting the resources in production process. Unskilled labour cannot be effective or productive to an economy that is why there is a need to invest in this sector.

With regards to the two models of the pioneers of endogenous growth theory, the basic assumptions include that both models assume that technological progress and innovation are driven by the deliberate efforts of individuals, firms, and institutions. They emphasized the need for human capital development to promote economic growth. Hence, the basic inputs in production are capital, labour, human capital and technology. The technology component is embodied knowledge that can be grown subsequently. Human capital is cumulatively embodied with the product of formal education, on-the-job training and learning-by-doing. The Romer model has three sectors: (a) the first sector (research sector) uses stock of knowledge from the human capital to produce new knowledge or products in form of designs for producing capital goods (producer durables); (b) the second sector uses the new designs from the research sector in the production process of final goods; and (c) a final goods sector uses human capital (skill, knowledge and other potentials) and producer durables (but no raw material) to produce final output (Romer, 1986). The theory was criticized based on its assumptions. Some critics argue that the theory placed so much emphasis on human capital and ignored other factors that can contribute to economic growth. The theory has been accused of being based on assumptions that cannot be accurately measured.

Relating it to terrorism and economic growth in Nigeria, this theory emphasized the need for human capital development as key to economic growth. Hence, the failure on the part of the government to priorities education and health in all ramifications has caused unemployment, poverty and other social vices which have made the majority of the youths to result in violence and at its peak insurgency which is known to have a severe negative impact on the growth of the economic. In summary, the endogenous growth theory postulates investment in human capital development that creates new technological knowledge as a driver of long-run growth. However, if human capital is not priorities, the citizens become liabilities and threat to the government which would have a negative impact on the economy.

Overview of Terrorism in Nigeria

Terrorism refers to a violent uprising against established authority. It involves efforts by a faction to seize control of a government through force, as defined by Roberts and Timothy (2009). The United Nations (2015) defines it as a group’s endeavor to overthrow a government using violence. These groups, also referred to as insurgents, rebels, or terrorists, aim to overthrow their country’s government (United Nations, 2015). Notable instances include the actions of Boko Haram during President Goodluck Ebele Jonathan’s tenure. Nigeria has witnessed various violent factions throughout its political history, but not all groups with opposing agendas should be labeled as insurgent groups. Examples like IPOB and Niger Delta Militant are driven by personal motives rather than aiming to overthrow the government. Okolo and Akubo (2019) note that Nigeria’s worst wave of violence has been perpetrated by a prominent group called Boko Haram. Boko Haram is a Hausa phrase meaning Western Education is Forbidden or Sin’ (Murtada, 2013). Its Arabic name is called Jama’atu Ahis Sunna Lid da’awati Wal-Jihad which is translated in English as ‘People Committed to the Propagation of Prophet’s Teachings and Jihad’ (Abdullahi et al., 2020). Originating in 2002 in Maiduguri, Borno’s capital, this Sunni Islamic group initially advocated a strict interpretation of Nigeria’s Islamic Law (Abolurin, 2012). The group initially avoided violence, engaging in clashes with security forces during its formative years (Brock, 2012). However, following government attacks which resulted to the killing of their leader, Muhammad Yusuf, in Maiduguri, and over 700 others, in 2009 (Blanchard, 2014); the group shifted its approach by adopting tactics like suicide bombings, kidnappings and attacks on religious institutions (Anyio & Atobatele, 2017). Boko Haram has spread terror since 2010, alleging that to its dissatisfaction with the existing Nigerian State because of its western value orientations.

Boko Haram’s actions not only present a significant challenge but also epitomize more profound threats to Nigeria’s security. These activities have exacerbated the nation’s economic crises on a national scale (Badejogbin, 2013). As stated by Utile (2016), the terrorism by Boko Haram especially in northern Nigeria jeopardizes all aspects of human existence, spanning from politics, economic, physical safety, societal harmony and even deaths.

Evidences from terrorism reviews show Boko Haram is the deadliest terrorist group in Nigeria. Deaths perpetrated by different sectarian groups like Boko Haram, Niger Delta militancy, and IPOB are presented in Figure 1.7.

Figure 1.7: Deaths Caused by Different Sectarian Groups in Nigeria

Source: Adapted from Nigeria Security Tracker (2023)

Empirical Literature Review

Using a positivist research paradigm, Rotimi et al. (2024) employed a Structural Vector Auto-regression (SVAR) approach to analyze the impact of terrorism on economic variables in Nigeria. The SVAR model incorporated endogenous variables such as economic growth, capital, terrorism, and trade. Data covering a 42-year period from 1980 to 2021 were utilized, and the result found the detrimental impact of terrorism on productivity and economic growth in Nigeria. The study suggested highlighting the need for effective counter-terrorism measures to mitigate these effects.

Ifeanyi (2023) carried out an exploratory study on the impacts of insecurity on the economic development of Nigeria using Borno state as a case study.  The study employed a descriptive survey using 100 samples and one-way ANOVA to test the research hypothesis. The questionnaire emphasized variables such as Loss of resources, Boko Haram as a foreign organization, Boko haram on the basic needs of life, Boko haram on unemployment, Boko haram on relocation and Boko haram on the poor person as against the rich. The study found and concludes that Nigeria is losing a significant amount of resources because of instability in the Northeast and that Boko Haram’s designation as a terrorist group threatens foreign investment and education, hence, disrupting economic development.

Omolua and Aniemeke (2023) investigated the economic effects of insecurity and terrorism on the Nigerian economy from 1990 to 2022. The data was analysed using ARDL, and the results show that in the long term, the terrorism coefficient has a negative economic impact on Nigeria’s GDP (economic growth), which is also statistically significant. The unemployment rate was similarly statistically significant, but it had a negative economic impact on GDP in the near run. The research proposes, among other things, that the Nigerian government pursue any acceptable plan to restore peace in the country in order to speed economic growth and development.

Amah and Eze (2023) investigated the impact of terrorism on Nigeria’s economic growth between 2010 and 2020, focussing on GDP and FDI. The study used an Expo-Facto (Historical) design with qualitative data analysis. The data analysed show that terrorism has become a threat to Nigeria’s economic growth in the reviewed years, as evidenced by annual reports such as GDP reports, FDI reports, the Economic Growth Index, the Nigeria Terrorism Index, and other indices of economic growth. The study suggested, among other things, that the Nigerian government develop a tangible domestic economic policy to raise its GDP by focusing more on the economic sector, which is a nation’s pillar of survival.

Kabiru et al. (2023) investigated how terrorism affects economic growth in Nigeria. Time series data for Nigeria from 1999 to 2022 were analysed using ordinary least squares and quantile approaches. The study’s variables include GDP, the number of terrorist attacks, foreign direct investment, and expected years of schooling. The findings reveal that terrorism has a negative impact on Nigerian economic growth, both inside and outside of the data mean. The study recommended that, in addition to taking military action against terrorist activities, policymakers allocate budgetary funds for socioeconomic development in affected areas in order to address the root causes of terrorism, such as poverty, illiteracy, income inequality, unemployment, and justice.

Saleh (2021) explored the insecurity and economic development in Nigeria from the perspective of the Boko Haram insurgency. The study focused on different activities of Boko Haram insurgence and the causes of the insurgency in Nigeria, and employed qualitative research. It was found that the security threats which include insurgency, armed banditry, kidnapping, cyber warfare, sabotage and terrorism are rooted in common socio-economic denominators such as unemployment, extreme poverty, injustice, illiteracy, poor health care and lack of infrastructure.

Abakpa and Tyokosu (2022) investigated the effect of Boko Haram insurgency in the Northeast on the socioeconomic activities of Nigeria from 1994 to 2013. With their focus on insurgency and agricultural output as variables and employing the autoregressive integrated moving average (AIMA) as a method of analysis, their study found that the Boko Haram activities in the North East had significantly affected the socioeconomic activities in North – East and Nigeria as a whole.

Ugbedeojo (2022) uses a documentary approach of data collecting and relies on qualitative analysis as a framework of contextual analysis of relevant data to investigate acts of terrorism perpetrated in both the North and South of Nigeria and how they have affected Nigeria’s economic growth. According to the findings, terrorism had a detrimental impact on economic growth. Therefore, in order to promote sustainable economic development, it was suggested that the government step up efforts to diversify the economy, take a more non-kinetic approach to counterterrorism, protect porous borders, and deal with the underlying causes of terrorism.

Adebayo (2022) using the historical method of analysis explored Boko haram insurgency and its implication on Nigeria’s socio-economic development.  The findings of their qualitative research showed that Boko-Haram activities have negatively affected socio-economic activities mostly in the north and national development at large.

Hauwa and Ajidani (2022) examined the impact of insurgency on socio-economic status of households in rural areas of north central, Nigeria, between 2000 and 2021. The study adopted survey method and responses were obtained through questionnaires from seven states in the study area, including FCT. The sample size covered 2100 individuals and OLS was used to analyze the data. The findings however showed that all the indicators of insurgency (ethnic crises, socio-economic crises and political crises) have negative implications on socio-economic status such as health, education, economic activities/income generation) of the residents of north central in Nigeria. The study recommends that government should develop strategies like gathering modern intelligence, adopting advanced technology to fight insurgency.

Barcena et al. (2022) used yearly data from 1989 to 2019 to investigate the consequences of terrorism activities, such as attacks, deaths, and injuries, on the economies of Nigeria, Pakistan, and Turkey, utilising various economic variables such as unemployment, inflation, and foreign direct investments. The study also seeks to assess the differences in impact between low-middle-income nations such as Nigeria and Pakistan and middle-upper-income countries like Turkey. It is evident in low-middle income countries that fatalities and the number of attacks are higher, which is responsible for their economic collapses and an impact on all the economic variables stated in this by using a cross-country analysis and a multiple regression test. This research also proves that increase in terrorism activities have an indirect relationship with FDI inflows. In addition, rising terrorist activity may raise unemployment and inflation rates. The study’s conclusions led the researchers to suggest that the three participating nations—Nigeria, Pakistan, and Turkey—should adjust their attention to the impacted economic factors whenever specific acts of terrorism take place. For example, by developing measures to lessen the incidence of terrorist attack or mitigate the effects of such attacks on foreign direct investment, unemployment, or inflation.

RESEARCH METHODOLOGY

Theoretical Framework

The theoretical framework of this study is anchored on the endogenous growth theory. This theory helps to illustrate a chain of reaction on how terrorism emanates and its impact on the economic growth of a nation. The endogenous growth model by Paul Romer contributes as a framework by giving a vivid explanation of the second chain of connecting terrorism and economic growth but now goes further to emphasize on investment in human capital. The theory states that any form of investment, be it government or private investment into human capital, innovation and knowledge plays an important role in economic growth. It further shows how a more knowledge-based economy gradually leads to economic development. The policy measures adopted in an economy determine the long-run growth rate of an economy. For instance, if there is increased access to education, research and development would increase the growth rate indirectly by increasing the incentive for innovation which is an endogenous model (Romer, 1994). This theory strongly postulates that the rate of technological change depends on the amount of educated human capital devoted to applied research and development. Therefore, the theory is stated as;

Y = F(K, L, A) ……………………………………………………………….. (1)

Y represents economic growth, which results from the combination of K (capital), L (labor), and A (technology). A is a form of technology that represents embodied knowledge, which can be cultivated over time. When labour is invested in and enhanced, it becomes human capital, which is a central driver of economic growth. Consequently, the government’s inability to address the population’s needs has led to labour, rather than human capital, becoming a source of conflict, negatively impacting economic growth. This study explores the long-term impact of terrorist activities by youth groups, who could otherwise be considered as untapped or unproductive human resources, on the overall economy.

Model Specification

The model by Alade et al. (2021) is adapted for its foundational approach to analysing economic growth as a function of terrorism, human capital development, and government expenditure but modified in the variables inclusion as follows;

Model 

RGDP = f(TERR, CPST, DEFS, LFPR, INFL) ………………………… (2)

Where,

TERR = Terrorism, proxied with Nigeria Terrorism Index

CPST = Capital stock

LFPR = Labour force participation rate

DEFS = Defence Spending

INFL = Inflation

The explicit form of the model is given as;

RGDPt = ꞵ1 + ꞵ2TERRt + ꞵ3CPSTt + ꞵ4LFPRt + ꞵ5INFLt + µ

Where

ꞵ1 = intercept

ꞵ2, ꞵ3, ꞵ4, and ꞵ5 = Parameters of estimation

µ = error term

The ARDL model is the major tool for parameter estimation and it is given in the natural log form as;

lnRGDPt = ꞵ1 + ꞵ2∑lnRGDPt-1 + ꞵ3∑lnTERRt-1 + ꞵ4∑lnCPSTt-1 +ꞵ5lnDEFSt-1 + ꞵ6lnLFPRt-1 + ꞵ6lnINFLt-1 + δ₁lnTERRt-1 + δ₂lnCPSTt-1 + δ₃lnDEFSt-1 + δ₃lnLFPRt-1 + δ₃lnINFLt-1 + µ

Data Sources and Explanation of Variables

The study obtained time series data on TERR a proxy for terrorism and the major explanatory variable in this study. It is measured in point and regarded as terrorism index extracted from the data base of Institute for Economic and Peace (IEP): Global terrorism index.

CPST is capital stock which is a proxy of general government capital stock measured in billions of naira and gotten from investment and capital dataset (ICSD), new IMF data portal.

DEFS the variable for defence spending is weighed by government expenditure measured in billions of naira and obtained from the national bureau of statistics (NBS).

The variable labour force participation rate (LFPR) is the proportion of the population that is actively employed and it is measured in percentage of the total population.

Inflation is abbreviated INFL as a proxy for general inflation measured as the percentage of the increase in price.

Data Presentation, Analysis And Result 

The study employed the use of econometric tools in the analyses of the variables as shown in the model. The E-views package was used in the estimation process and results are presented in tables.

Data Analysis and Presentation 

The time series data were analyzed and are shown in the appendix. The Augmented Dickey-Fuller (ADF) unit root was used to determine the stationarity of all the variables as seen in Table 1.

Source: Author’s extract from E-views

Table 1: Summary of the ADF Unit Root Test

Source: Eviews 10.0 Output

The Augmented Dickey Fuller test presented in Table 1 presents the unit test results. From the results, TERR, CPST, LFPR, DEF and INFL are stationary at first difference except RGDP that is stationary at level, meaning the independent variables are integrated of order one while the dependent variable is integrated of order zero.

Table 2: Summary of the Long Run ARDL Model

Source: Researcher’s Computation Using Eviews 12.

The result of the long run estimates in Table 4.4 show that the coefficient of the lagged value of terrorism (TERR) has a negative value of -0.0111 while the p-value is 0.0000. The coefficients of capital stock (CPST), labour force participation rate (LFPR) defence spending (DEFS) are positive with economic growth in Nigeria while inflation also has a negative and significant relationship with economic growth.

Table 3. Bound Test

Source: Researcher’s Computation Using Eviews 12.

Table 3 presents the summary of ARDL Bounds test for co-integration for the three models to establish a long run relationship among the variables. The result however shows that there is co-integration among the variables since the F statistic values of 8.1970 for model one, 6.2431 is greater than the upper and lower bounds at 5 percent critical level. This leads to the rejection of the null hypothesis which states that there is no long run relationship among the variables. It is therefore concluded that there is long run relationship among the variables.

Table 4: Summary of Short Run Estimates

Source: Authors’ Computation using E-View 10.

The short run estimate for model one shows that terrorism (TERR) and inflation (INFL) have negative effect on economic growth in Nigeria. The coefficient value for terrorism is -0.00579 and -0.0781 for inflation. This implies that on average, 1% increase in TERR and INFL will decrease RGDP by about 5.8% and 7.8% respectively. The coefficients of CPST, DEFS, and LFPR are 0.0892, 0.0717, 0.0068 and 0.2897 respectively. These values show that CPST, DEFS, and LFPR are positively related to RGDP. With the prob. values for; TERR = 0.0000, CPST= 0.0485, DEFS = 0.2381, and LFPR = 0.0037. TERR, CPST, and LFPR are statistically significant with economic growth owing to the fact that their prob. values are below the 5% significance level. However, DEFS is not statistically significant. The error correction term (ECM) has the expected sign of -0.1435 with significant prob value of 0.0000. This suggests that in the current time about 14% disequilibrium in previous years will be adjusted for.

DISCUSSION OF FINDINGS

Firstly as seen in Table 1 the variables are stationary as shown by the ADF statistics against the critical values at 5 percent as the ADF values in absolute terms are greater than the critical values at 5 percent level. This leads to the rejection of the null hypothesis that the variables have unit root. It is then concluded that the variables are stationary and the estimates can produce consistent and unbiased results. Based on this mixed order of integration, the ARDL Bounds test was conducted to show the long run relationship.

The long run model revealed that TERR has a negative and significant relationship with economic growth. Its coefficient of -0.0111 indicates that 1% increase in terrorism will decrease economic growth by 11% on average. The p value reveals that terrorism is statistically significant with economic growth in Nigeria this is in agreement with the one of the findings of Ifeanyi (2023) and Saleh (2021).

. CPST has a value of 0.012288 with statistically significant relationship. It implies that on average, 1% increase in capital stock will increase economic growth by 0.87%. Similarly, LFPR has a positive value of 0.047509 with the prob. value not significant. This suggests that 1% increase in labour force participation rate will increase economic growth by 4.7%% on average. The coefficient of defence spending which stands at 0.438716 with the prob. value though not significant, means that on average, 1% increase in DEFS will increase economic growth by 4.4%. The variable is however not statistically significant at 5%. These three variables are all positive both in the short and long run and this means that defence spending reduces terrorism, level of capital stock and labour force participation rate can boost output growth. The negative value of -0.189430 for INFL indicates that, 1% increase in inflation will lead to a decrease in economic growth by about 19%. This result is in line with the findings of Mukolu and Ogodor (2018).

The result of bound test however shows that there is co-integration among the variables since the F statistic values of 8.1970 for model one, 6.2431 is greater than the upper and lower bounds at 5% critical level. This leads to the rejection of the null hypothesis which states that there is no long run relationship among the variables. It is therefore concluded that there is long run relationship among the variables.

The R² found in this study confirms that the model represents the true situations of Nigeria since the values are extremely high and strong. Similarly, the post estimation tests conducted reveal that our models are reliable, correctly specified and stable.

Study Gap

Most of the studies reviewed have segregated defence spending and did not include such core variables that also affect economic growth while this research used defence in a desegregated form and included growth contributory factors such as capital stock and labour force participating rate. The year of coverage for the study is one of the distinguishing features that differentiate it from the reviewed studies.

SUMMARY CONCLUSION AND RECOMMENDATION 

Summary

The research is a study of the impact of terrorism on economic growth in Nigeria covering a period of 1990-2023 by studying the reaction of economic growth to the changes in variables such as capital stock, defence spending, labour force participation rate and inflation.

Firstly the Dickey Fuller unit root was conducted to ensure stationarity of the variables and it was found that all the independent variables were stationary at first difference except real GDP that is stationary hence, the choice of auto-regressive distributive lag (ARDL) model.

The long and short run ARDL model revealed a negative and significant relationship with economic growth both in the long and short run.

The relationships between capital stock, defence budget and labour, participation and economic growth in the long run and short run are positive but not significant.

The relationship between general inflation and economic growth is negative both in the short run and long run. The value of the F-statistic being greater than the upper bound value confirms the long run relationship among the variables.

Conclusion

The variables TERR, CPST, LFPR and INFL being stationary at first difference means they contain not unit root after first difference and so the study concluded that they are integrated of order one and are stationary at that level while RGDP that is stationary at level means that it is integrated of order zero and stationary at that level.

Terrorism having a negative and significant relationship with economic growth is one of the variables that impact negatively and significantly on economic growth in Nigeria. The conclusion is that it is one of those growth inhibiting factors in the economy of the country.

Capital stock, defence spending and labour force participation having positive but not significant conclusively means they impact positively on economic growth. From economic theory, the level capital stock and labour force participation can impact on output growth to a greater extent while judicious use of defence spending could lead to peace creating a ground for businesses to flourish.

Inflation having a negative and insignificant relationship with economic growth shows that it is a factor that hinders growth in Nigeria.

Recommendations

The negative and significant relationship between terrorism and economic growth is a point of policy reference for the government. If it continues output growth will be a mirage and we know what that means. The government has to take security issues in Nigeria with all seriousness and determinations. Firstly, disbursement of security funds should be monitored and accompanied with retirement of same funds after execution of security projects. It should be a serious national assignment rather than a personal thing where people use it to siphon money.

Investment in both human and natural resources should be encouraged through low interest rate and training of the labour force to ensure greater engagement of the labour force.

Effort should be geared toward increasing output by both government and private sector spending. The tax system should be a progressive one with expansionary monetary policy devoid of inflation.

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