Nigeria has lost at least N1.06 trillion, or two per cent of its Gross Domestic Products (GDP) to insurgency, analysts have said.
An increasingly violent insurgency by the Islamist sect, Boko Haram in the economically stagnant North has begun pressuring the country’s finances by forcing extra spending on security.
The president on Wednesday also raised alarm that the activities of the sect were destroying the economy of the North. A day later, he confessed that he was tired of hearing about bombing stories.
The analysts said activities of Boko Haram were diverting money from needed infrastructure spending and could be costing as much as two per cent of the country’s economic output.
The only good news is that the severity of its attacks that has leapt in the last six months with its strikes have been largely confined to the Muslim North, hundreds of kilometres from the commercial hubs of Lagos and the Niger Delta, home to thriving oil industry.
This means that foreign investors have not been unduly rattled in a broad sense.
“The North-East is not all that important economically, so unless they start blowing up stuff in Lagos, or they can find a way to disrupt business on a larger scale, I think foreign investors are prepared to live with the threat,” Alan Cameron,? an analyst at the London-based investment firm, CSL, told Reuters.
Foreign direct investors and portfolio managers are, however, concerned about the progress of structural reforms in one of the continent’s most inefficient and wasteful economies, and about the government’s ability to keep a lid on spending.
Nonetheless, the Boko Haram insurgency is having a bigger impact. The country’s security bill has risen to 20 per cent of spending in the 2012 budget from 16 per cent in 2010, leaving less money for much-needed infrastructure projects and for work on reforms to the power and other social and industrial sectors.
Analysts said the sect’s activities had eaten into the country’s productivity by at least two per cent.
Bismarck Rewane, chief executive of Financial Derivatives Company (FDC) Limited said that currently, the Gross Domestic Products (GDP) of the country stood at approximately $270 billion or N43.2 trillion.
Based on that figure, it then means that the country would have lost N1.06 trillion to insurgency.
“It implies less spending on power infrastructure, education and health care, which when combined, have been allocated a smaller budget than security in 2012,” Renaissance Capital economist, Yvonne Mhango said in a note.
Boko Haram killed more than 250 people in a series of attacks in January, according to Human Rights Watch, and security experts believe it has growing ties with outside Islamist groups, including al Qaeda’s North African wing.
It has become President Goodluck Jonathan’s biggest headache and is threatening to divert the government’s attention from the pressing but thorny issue of weaning the economy away from its reliance on crude oil exports.
“You can draw parallels with Japan, which experienced a nuclear crisis last year. The government was distracted by the disaster to the detriment of the economy,” one European investor in Africa told Reuters.
“If the Nigerian government gets distracted by Boko Haram rather than economic growth, then it could start to witness weakening economic fundamentals,” he said.