The Cost of Insecurity on Emerging Economies: The Nigerian Experience

Abstract

The paper examined the cost of insecurity on the Nigerian emerging economy using time series data from 1986-2011. ADF test conducted show the stationarity of the series at least at second difference with a probability of 99%. A co-integration to show long run relationship was then estimated using the Engle-Granger Test, which indicated that a long run relationship existed among the series. The Rho-1 values indicate that the explanatory variables were strongly positively correlated with the dependent variable, except for FDI which had a weak relationship. The VECM estimates show that a long run positive relationship exist between GDP and the independent variables.   The study found that an increase in DEXP, INSEXP (that is, a reduction in insecurity) leading to an increase in FDI and GFCF would naturally cause GDP in Nigeria to increase and vice-versa. In other words, insecurity would exert negative influence on GDP. Other empirical evidence obtained show that the northern Nigeria economy has been negatively affected by the activities of the Boko Haram sect. The study recommended that sincerity of purpose on part of the government through transparency and accountability, would reduce insecurity and the economy would grow.