The Root Causes of Terrorism, Cost and its Impact on Economic Growth and Capital Formation and Foreign Direct Investment: 1980-2010

Abstract

Terrorism is one of the dreaded phenomenons affecting the Nigerian people and her economy. This phenomenon has defiled many solutions. This study examined the popular held view that the "root cause of terrorism" is poverty within the period 1980-2010. That is terrorism is caused by poverty related factors (economic variables - GDP, HDI, INFL, FDI, GI, UNE) and poverty (PI) itself. The study extended the investigation to determine the cost of terrorism as well as if political factors (PR, PP, SG, and REP) and demographical factors (POP, ERD) are also the root cause of terrorism as well the impacts of terrorism on GDP, GI and FDI. The findings from this study indicated that within the reviewed period, our study did not support the "rooted-in-poverty hypothesis", "terrorist-growth hypothesis", "growth-terrorist hypothesis", "terrorist-capital formation hypothesis", nor "rooted-in political demography hypothesis". That is none of these factors even poverty and ERD are the root cause for terrorism. Poverty related factors only make the country to be a breeding and dumping ground for terrorists and not the root cause for their activities. Nevertheless, among the variables used in this study, only POP and SG were found to be significant predictors of terrorism acts. Before arriving at this, we scan our data to ascertain their stationary state by applying the ADF and PP-test. However, we were unable to determine the existence of a long run relationship among our data set using the Johansen Co integration test. As such we ran the regression in their first difference employing the VAR and OLS estimating procedure. To complement our findings we carried out an impulse response function. Our results from it confirmed are findings from the VAR regression. Therefore, we recommended that if the government is determined to win the "fight against terrorism" focus must be on controlling the movement (immigration) of people into the country and ensuring that the principles or tenets of democracy are upheld.