Although the assurances from the nation’s security forces have begun to douse the tension created by the recent security alarm raised by the United States and a few foreign missions, analysts warned that the security scare is capable of eroding government tax revenue, food production, foreign direct investment and government’s oil revenue, writes Festus Akanbi
A few weeks after a security alert was triggered by the United States Embassy in Nigeria, analysts said that the Nigerian economy has begun to bear the brunt with the exit of some staff of the American embassy; the panic mode in some of the other embassies in Nigeria and the attendant negative report about the country.
This fear was confirmed by the Minister of Information and Culture, Lai Mohammed and his Defence counterpart, Major General Bashir Magashi (rtd) when they appeared before a National Assembly committee to defend their ministries’ 2023 budget proposals a few weeks ago.
Mohammed told the Senate Committee on Information that the long-term effects of alerts on the economy would be “quite harmful,” disclosing that he received inquiries from Nigerian missions abroad on the security situation.”
“I received several inquiries from our missions abroad as if there was a problem in the country. It was really unfortunate.
“These embassies heightened the situation by evacuating their nationals and sending advisories to stay away from Abuja.
“The long-term economic effects of the advisory will be quite harmful to Nigeria because investors will not come and invest in a country alleged to be unsafe. It was really sad.”
The Scare
A statement issued by the Embassy on October 22, 2022, had warned of an elevated risk of terror attacks in Nigeria, specifically in Abuja, listing targets to include, but are not limited to government buildings, places of worship, schools, markets, shopping malls, hotels, bars, restaurants, athletic gatherings, transport terminals, law enforcement facilities, and international organisations.
The US Embassy’s alert was swiftly reiterated by similar advisories to their citizens by the United Kingdom’s, French, Australian, Canadian, and other European Union missions in the country.
On its part, Australia advised its citizens to reconsider travelling to Nigeria “due to high threats of terrorist attack and kidnapping, the volatile security situation, possible violent civil unrest, and high levels of violent crime.”
In the ensuing confusion, some of the foreign missions in the country approved the evacuation of their non-essential staff and their families. This was in response to credible intelligence that they claimed suggested potential attacks on government buildings, places of worship, markets, shopping malls, transport terminals, and other public places in the FCT and other Nigerian cities.
Hurting the Economy
Worried by the negative image the development has triggered, economic affairs watchers said handling the security situation may further hurt Nigeria’s economy in many ways.
They pointed out that terrorism leads to the reallocation of economic activity away from private investment spending to government spending on defence infrastructure, with an overall net effect of crowding out private investments.
According to them, terrorism alters the composition of government expenditure by causing an increase in the defence component of government expenditure vis-a-vis other expenditure items.
In recent times, Nigeria has ascended the ranks as one of the most active terror destinations in the world in terms of the frequency of attacks and sophistication of attacks.
Analysts, therefore, foresee a situation whereby the security scare in the country would affect international tourists’ arrival and ease of doing business.
In their opinion, they believed that terrorist activities will adversely affect the inflow of FDI to the country because of the assumption that terrorism reduces investors’ confidence in an economy because of insecurity. Thus, the expansion of the market size and liberalisation of capital accounts enhance the attractiveness of a country to FDI.
Responding to THISDAY inquiries last week, former Director-General of the Nigerian Economic Summit Group (NESG), Mr. Frank Nweke Jnr said it is true that there is a correlation between the security scare and the economy.
Nweke, who is also a governorship candidate of the All Progressives Grand Alliance (APGA) in Enugu State, said no meaningful development can take place in an atmosphere of insecurity.
According to him, “The security alert that the United States Embassy in Nigeria issued recently is not a one-off thing. We have all watched how security in our country has deteriorated under this administration. It has gone from bad to worse or anything worse than worst. That is the situation we find ourselves in.”
Corroborating the fears of many investment analysts that the current tension is capable of warding off potential foreign investors in Nigeria, the former NESG helmsman said: “The way things stand today, I believe no investor will be eager to come and invest in our country.
“Look at what happened recently, especially the exodus of foreign missions from Nigeria. It is not a good indicator. Even from a national perspective or even though we often make reference to security in the context of investment, I will encourage people to see that security is important for the cost of daily life. The basic thing we want to put in place for investors is also the basic thing that every Nigerian needs, even for local investors.
“Insecurity constrains their businesses; undermines confidence building and hinders any effort to make things happen in the country, except in the area where they are very familiar or where they do not have to travel too far to superintend their investments.”
One of the groups that have shown serious concern over the decline in investment inflow and domestic food production challenges currently being aggravated by rising security concerns is the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA).
According to the chamber, Nigeria is currently facing a risk of decline due to the perception of Nigeria as having an investment climate that is unfriendly to business.
Citing recent data from the National Bureau of Statistics (NBS) on the decline in foreign investment by as much as 81 per cent, NACCIMA noted that a loss of Foreign Direct Investment is just one dimension in which the economy is affected by insecurity.
NACCIMA President, Ide Udeagbala, stated that domestic food production is at risk and there is a dimension of insecurity that is contributing to rising production costs and reduced consumption of goods and services.
According to him, the security situation in the country demands urgent and serious attention.
Udeagbala stated that these are uncertain times, necessitating the need for the federal government to quickly address the increasing insecurity challenges, poor infrastructure, irregular power supply and increasing inflation rates which have remained a threat to businesses and investments in the country.
A commentator, Doris Dokua Sasu, in a report titled, Economic Cost of Terrorism as Share of GDP in Nigeria 2017-2019, maintained that in 2019, the economic cost of terrorism in Nigeria covered 2.4 per cent of the country’s GDP, a decrease by 0.3 percentage points compared to the previous year.
Nigeria has been ravaged by terrorist activities which have made the country unsafe for Nigerians and foreign investors. The country was named the third most afflicted by terrorism in the 2020 Global Terrorism Index, trailing only Iraq and Afghanistan.
According to reports, the disturbing level of insecurity has rendered the economy unappealing to local and foreign investors, who have become apprehensive of investing and putting their hard-earned resources into profitable investment in Nigeria.
Trail of Violence
Apart from the March 28 train ambush in Kaduna where 62 passengers were abducted and eight persons killed, bandits have attacked the Kaduna Airport, massacred worshippers at a church in Owo, Ondo State, and taken control of territories in some parts of the North.
Shortly before the terror alerts from foreign embassies, the media were replete with news of terrorist activities as some of them were said to have encircled the FCT and punctured its myth of impregnability.
In July, Boko Haram terrorists raided the Kuje Correctional Centre, freeing over 800 inmates, 64 of them terror suspects. Troops of the Nigerian Army Brigade of Guards, which provides security for the Presidential Villa and FCT, were similarly ambushed by terrorists who killed two officers and six soldiers.
Given the recent efforts of the various security organisations to calm the frayed nerves, analysts said expectations will be high that the security forces will not relent in their efforts to create a peaceful atmosphere needed for businesses to thrive.
And as pointed out by Nweke, there is an urgent need to guarantee the safety of the people of Nigeria in the interest of the economy since no foreign investor will be ready to commit his resources to a country which operates in an atmosphere of terror.
