Effects of Insecurity and Governance Quality on Economic Growth in Nigeria

Abstract

This study examined the effects of insecurity and governance on economic growth in Nigeria over the period 2002–2024. The study focused on terrorism incidence, terrorism injuries, terrorism fatalities, military expenditure and political instability as explanatory variables while GDP represented economic growth. Domestic investment, FDI, domestic credit, interest rate and globalization index were introduced as control variables in the three models. Annual time-series data were analysed using the Autoregressive Distributed Lag (ARDL) framework, with terrorism incidence, injuries and fatalities estimated in separate models to avoid multicollinearity and capture their distinct economic effects. The findings reveal that terrorism incidence significantly reduces economic growth in both the short and long run, confirming its persistent disruptive effect on productive activities and investment. Terrorism injuries exert a negative but insignificant effect in both periods, while terrorism fatalities significantly reduce growth in the short run but become insignificant in the long run. Military expenditure has a positive short-run effect but no significant long-run contribution to growth, suggesting that security spending alone does not guarantee sustained economic performance. Political instability significantly constrains short-run growth across the models, although its long-run effect is model-dependent. Domestic investment and domestic credit generally promote growth, whereas foreign direct investment exhibits a predominantly negative effect. The study concludes that Nigeria's growth challenge is closely linked to persistent insecurity and governance weaknesses. It recommends an integrated security–development strategy combining effective counter-terrorism measures, political stability, institutional strengthening, productive security expenditure, domestic investment and improved developmental linkages from foreign investment.