Growth and Fiscal Effects of Terrorism in Nigeria

Abstract In addition to their effects on economic growth, prolonged terrorist activities can reduce government revenue. Apart from the destruction of physical infrastructure and human capital, terrorism also has lagged-effect on investment, which ultimately dampens the fiscal position and further affects the economic growth. This chapter is devoted to the discussion on the interaction between terrorism, growth, and fiscal variables in Nigeria using real per capita income, government revenue, government expenditure and defense expenditure. The findings show that terrorism is associated with low economic growth which has the potency to reduce government expenditure. It was also observed that government expenditure can be improved by fostering government revenue. In view of this, apart from domestic efforts, interventions of international communities are further needed to reduce the drastic effects of terrorism, especially in meeting and improving expenditure on growth-enhancing sectors.