Boko Haram And Its Impact On The Nigerian Economy

Boko Haram And Its Impact On The Nigerian Economyby Angus Gillespie

Boko Haram and its impact on the Nigerian economy by Angus Gillespie

Despite emerging from the murky shadows within Nigeria just a dozen years ago, Boko Haram has quickly earned itself an infamous reputation for being one of the most callous and violent radical Islamist groups in African history. In fact, it’s already been tagged a terrorist group by western countries such as the United States. Over the past 12 to 15 months, Boko Haram has unleashed a massive wave of violence, fear, and chaos throughout the northern African country. This instability has noticeably affected Nigeria’s operational capacity and has impeded its economic growth significantly.

Founded in 2002, Boko Haram is an ultra-extremist Islamic sect that opposes Western education, which it considers forbidden. Beginning military operations in 2009, Boko Haram aimed to establish an independent Islamic state, with roots extending into northern Cameroon and parts of Niger. The group’s leadership maintains international connections to Al-Qaeda, which amplifies its threat level. Recent weeks have seen Boko Haram militants kill dozens of Nigerians, with no indication that the violence is abating.

An attack involved assailants disguised as soldiers opening fire on a crowd within a church compound. Boko Haram is known for targeting churches, schools, police stations, and tourists. Violence linked to them has resulted in approximately 12,000 deaths since 2002, a figure that increased substantially after 2009 when the group began arming itself heavily. This violence has placed enormous pressure on Nigeria’s government, especially amid reports of some army generals aiding Boko Haram, possibly in anticipation of a national coup. Several senior military officers have been tried in courts for supplying arms and information to insurgents, although official statements deny these allegations.

Nigeria’s government faces mounting domestic and international pressure to intensify efforts against Boko Haram and to rescue more than 300 schoolgirls kidnapped in April. President Goodluck Jonathan declared a state of emergency in May 2013 in the northern states of Borno, Adamawa, and Yobe, most affected by Boko Haram. The insurgency retaliated by escalating bombings and attacks on towns and villages, including the infamous kidnapping of schoolgirls, which has drawn global attention and support from countries like the US, Canada, and Britain.

Approximately 55 girls have escaped captivity since their abduction. The Nigerian government has refused to negotiate a swap of the girls for detained militants, emphasizing a military solution. However, President Jonathan has linked the insurgency to widespread poverty, promising to address economic issues once stability is restored. Nigeria’s poverty rate is high, with the World Bank estimating two-thirds of its 170 million people living in poverty. Despite these hardships, Nigeria remains Africa’s largest economy, driven primarily by oil reserves, although these constitute only about 3% of the world's oil supply. Other sectors like banking, telecommunications, and the growing film industry have also contributed to its economic resilience.

Thanks to diversified economic sectors and a GDP of approximately $490 billion, Nigeria’s economy is comparable to that of Norway and Sweden. Nonetheless, the violence from Boko Haram has profound economic impacts. Once armed and active militarily, Boko Haram’s emergence caused an immediate decline in foreign direct investment (FDI). According to the World Investment Report 2013, FDI flows into Nigeria decreased by 21% in 2012—from $8.9 billion in 2011 to just $7 billion. This decline represented a loss of $1.9 billion, further straining Nigeria’s economy, which desperately depends on foreign capital to sustain growth, especially in its oil sector.

FDI plays a critical role in Nigeria’s economic development by enhancing trade, fostering domestic investments, and diversifying its economic base. A notable correlation exists between FDI inflows into the oil sector and Nigeria’s GDP, with studies indicating that an increase in FDI in oil can significantly uplift the economy. The heavy reliance on the oil sector makes Nigeria vulnerable to external shocks, including security issues. The suspicion that violence and insecurity drive a mass migration of citizens from conflict zones to relatively stable regions has already impacted economic activity, disrupting banking operations and leading to bank closures in areas compromised by violence.

This economic depletion is compounded by the political insecurity stemming from the insurgency. The continual movement of people seeking safety away from violence zones hampers local markets and reduces consumer spending, further straining businesses. The displacement and business closures undermine regional economic stability and hinder recovery efforts. The Nigerian government, under President Jonathan, faces mounting pressure to restore order. In 2013, foreign direct investments surged back to over $21 billion—up 28% from the previous year—highlighting the importance of investor confidence and stability.

Reflecting Nigeria’s complex economic landscape, Ernst & Young describes it as embodying a bipolar view: a dynamic high-growth market versus a chaotic, unstable environment. The geopolitical and security situation influences investor perceptions, with the northern regions increasingly seen as high-risk zones, prompting some investors to withdraw or suspend projects in these areas. Conversely, the resource-rich south remains relatively unaffected, which explains why Nigeria’s stock market has only experienced minor declines despite ongoing violence. The country’s strategic resilience illustrates the importance of security for economic stability.

Looking ahead, the coming 12 to 18 months are critical for Nigeria’s leadership to effectively address Boko Haram’s insurgency and restore stability. The response will influence both humanitarian and economic outcomes. Failure to contain violence risks eroding decades of progress and deterring future investment, which is essential for Nigeria’s long-term development. International partners and humanitarian agencies are closely watching Nigeria’s efforts, understanding that political stability and security are prerequisites for economic recovery and growth. The ongoing conflict exemplifies the fragile state of Nigeria’s development, but also underscores the resilience and potential template for rebuilding in post-conflict scenarios.

References

• World Bank. (2014). Nigeria Economic Update. World Bank Publications.
• United Nations Development Programme (UNDP). (2013). Nigeria Human Development Report.
• Ernst & Young. (2013). Nigeria Attracts Significant FDI Despite Violence. EY Reports.
• World Investment Report. (2013). UNCTAD.
• Ojo, A. (2014). Political Instability and Economic Development in Nigeria. African Journal of Political Science.
• Onuoha, F. C. (2014). Boko Haram’s international links and implications for Nigeria’s security. Journal of Terrorism Research.
• Obi, C. (2015). Oil dependence and economic resilience in Nigeria. Journal of African Economies.
• National Bureau of Statistics Nigeria. (2013). Nigeria Poverty Profile.
• The Guardian. (2014). Nigeria’s Economic Growth Amid Security Challenges. The Guardian Nigeria.
• International Crisis Group. (2014). Nigeria: Countering Boko Haram. Africa Report.