Counting the Costs of Insurgency: Nigeria vs Boko Haram

In mid-April 2014, the Nigerian terrorist group, Boko Haram, whose name translates roughly into “fraud is a sin”, abducted more than 200 school girls from their hostel in Chibok, a village in the northeastern Nigerian state of Borno. This act, along with two bombings in the capital city, were seen in part as an attempt to damage Nigeria’s credibility and stop the first World Economic Forum (WEF) conference hosted in Nigeria.

The WEF was successfully staged. But till this day the over 200 abducted school girls are yet to be brought home, despite the government efforts and public outcry from Nigerians, especially on social media with the famous #BringBackOurGirls campaign.

The group has previously attacked the United Nations headquarters and the Nigerian Police Force headquarters in Nigeria’s capital, Abuja. It is also responsible for a series of fatal church, mosque and market bombings, among other incidents.

No doubt, Boko Haram has inflicted broad psychological, social, political and economic damage on Nigeria and its peoples. And if its attacks continue, one casualty, in addition to the loss of human life, may be the country’s growing reputation as Africa’s investment hotspot.

In March 2014, a long overdue rebasing exercise made Nigeria Africa’s largest economy, with a GDP of approximately $510 billion, surpassing South Africa. Interest in Nigeria as an attractive albeit difficult investment destination predates the surge in GDP, though continued political instability and growing security concerns may make both local and foreign-owned businesses think twice before building and growing operations in the country.

In his paper, The Costs of Terror: The Economic Consequences of Extended Terrorism, written for the Konrad Adenauer Foundation, Adam Klein, an associate with the Washington DC-based law firm, Wilmer Hale, concluded that terrorists can harm economies by reducing consumer and investor confidence; forcing governments to invest in security, which reduces efficiency in key vulnerable industries such as transport and trade, among others, and redirects investment from more productive sectors; and potentially triggering wider geopolitical, religious or ethnic conflict, causing further economic disruptions.

At this point, the biggest economic casualty of terrorism in Nigeria has been interstate trade. An increase in Boko Haram activity over the past five years has seen scores of businessmen – particularly those of southern origin or Christian faith – relocate from Nigeria's northeastern regions to other parts of the country. Their exit, in addition to a federally mandated state of emergency rule, has hampered the local economy in Adamawa, Borno, and Yobe states where Boko Haram has been most active. Other northern states like Kano and Kaduna have also been impacted. Businesses with operations in the North, among them banks, transportation and telecommunications companies, have at times suspended operations because of an inability to provide security for their employees. Business does not thrive under siege.

According to the Performance Standards detailed by the Multilateral Investment Guarantee Agency (MIGA), a unit of the World Bank Group, investors do not have a solid base for doing business in a given environment if government is unable to assess and manage environmental and social risks and impacts and to safeguard and secure investments. Although reports indicate that business confidence in the country still remains relatively high, if Nigeria cannot check growing security concerns and guarantee a safe business environment, investors may look elsewhere. Nigeria need only look to Kenya, where the Somali Al Shabaab terrorist insurgency has taken its toll on a previously robust tourism industry, leading to a reduction in GDP as dwindling numbers of tourists reduce earnings outlooks in the hospitality industry.

The recent trends have not proven prohibitive for all businesses. At the WEF on Africa some $68 billion in investment was promised to Nigeria, despite the shadow of recent terror attacks. South African retail major, Shoprite, has also defied security concerns by opening its first outlet in the northern commercial hub of Kano, Nigeria’s second largest city.

However, if Boko Haram is not stopped, Shoprite’s move will be the exception in the future. The Nigerian government needs to do more to fight terrorism. It also needs to tackle the underlying causes of terrorism in more subtle ways. In a March 2013 European Scientific Journal publication, Nigerian academics pinpointed economic disenfranchisement and the social malaise bred by poverty and unemployment as root causes of the growing insurgency in Africa's largest economy. Combatting terrorism will take political, military and diplomatic engagement, but the country’s political elite will also have to look at the poverty and desperation that nurture it.