Insecurity, government expenditure and income levels in Nigeria: responses and implications

Abstract

This study scrutinised the linkages between insecurity, government expenditure, and income levels in Nigeria. To achieve this objective, data were collected from 2012Q1 to 2023Q2. For the data analysis, vector autoregression (VAR), impulse response functions (IRFs), and a pairwise Granger causality test were deployed. After testing for unit root and diagnosing the model for serial correlation and stability, the study proceeded with the VAR estimation. The independent variables were the Global Peace Index, the number of fatalities, and government expenditures on internal security and defense, while the real GDP was used as the dependent variable to measure income levels. The variables were incorporated into the Cobb-Douglas production function; hence, capital and labour were used as control variables. The Impulse Response Functions (IRFs) indicated that real gross domestic product responded negatively to the Global Peace Index rating and the number of fatalities due to security threats. On the other hand, RGDP responded positively to government expenditures on internal security and defense. The results of the Granger causality test showed there was a one-way causality from the independent variables to RGDP, implying that the independent variables were significant determinants of income levels in Nigeria. It was concluded that insecurity could distort income levels. Granger causality test results showed there was a single directional causal flow from the independent (explanatory) variables to RGDP, implying that the explanatory variables were significant determinants of income levels in Nigeria. As a result, beyond condemnations and reassurances, the government must investigate the underlying causes of insecurity in order to come up with a long-term remedy.