article · SN Business & Economics
This study examined the complex, non-linear, and time-varying impacts of insecurity and macroeconomic instability on Nigeria's economic growth from 1980 to 2020. Using NARDL and wavelet coherence analysis, it found a stable long-run relationship where increased insecurity significantly reduces economic growth by approximately 2.93%, a loss not equally recovered by security improvements. Inflationary shocks and contractions in capital formation also negatively affect growth, with contractions being more detrimental than expansions are beneficial. Exchange rate changes showed no significant impact. The research also revealed that the link between insecurity and growth is episodic, worsening during periods of heightened conflict.
Understanding the non-linear and time-dependent ways insecurity and economic instability hinder growth is crucial for Nigeria. This research provides a more accurate picture of these challenges, highlighting that simply improving security might not fully reverse past economic damage. This insight can help policymakers design more effective, preventive strategies to foster sustainable development.
This research provides an empirical foundation for policy design, particularly for government agencies and international development organisations focused on economic planning and security in Nigeria. The findings suggest the need for targeted, preventive interventions in high-conflict zones before broader macroeconomic reforms. It is early-stage research, offering insights for strategic planning rather than direct commercial products or services.
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Abstract Nigeria’s persistent growth underperformance depicts a complex interplay between insecurity and macroeconomic instability, yet existing studies treat this relationship as linear and time-invariant. This study addresses these gaps by examining the nonlinear and time-frequency effects of insecurity and macroeconomic instability on economic growth in Nigeria from 1980 to 2020. Methodologically, it combines the Nonlinear Autoregressive Distributed Lag (NARDL) framework, which distinguishes the growth effects of worsening and improving security conditions alongside asymmetric changes in inflation, exchange rates, and capital formation, with wavelet coherence analysis to trace time-varying and frequency-dependent relationships. The findings reveal a stable long-run cointegrating relationship in which rising insecurity reduces economic growth by approximately 2.93%, a loss not symmetrically offset by security improvements, consistent with investment irreversibility and hysteresis. Inflationary shocks constrain growth through cost-push and demand-compression channels, while capital formation contractions are significantly more harmful than expansions are beneficial. Exchange rate movements remain statistically insignificant, reflecting structural transmission inefficiencies. Wavelet analysis further shows that the insecurity–growth nexus is episodic, intensifying during periods of escalating insurgency and becoming multidirectional at medium-run frequencies. These findings provide the first systematic evidence of asymmetric and time-frequency effects in the Nigerian insecurity–growth nexus, offering a more nuanced empirical foundation for policy design. The results imply that effective policy must be preventive rather than reactive, sequenced to stabilise high-conflict zones before macroeconomic reforms can generate sustainable growth dividends.
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DOI: 10.1007/s43546-026-01303-5
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