CRITICAL ASSESSMENT OF THE IMPACT OF POLITICAL INSTABILITY ON THE GROWTH OF NIGERIAN ECONOMY.

CHAPTER ONE

INTRODUCTION

Background of the Study

Nigeria has faced ongoing obstacles to its economic growth and development, despite being praised as Africa's economic superpower because of its abundance of resources and sizable population (Valley, 2021). Of these difficulties, political unrest stands out as a major barrier that has a substantial effect on the nation's economic prospects and performance. Following Nigeria's 1960 independence from British colonial authority, the country has seen periods of political upheaval characterized by military takeovers, civil unrest, ethnic conflicts, and difficult election procedures. The nation's economic environment has been profoundly impacted by these unstable periods, which have also had an impact on investor confidence, policy consistency, and governance efficacy.

The persistent impediment to Nigeria's economic growth and development has been political instability. The nation has had numerous military takeovers, civil wars, and political upheavals since gaining independence in 1960, all of which have had a negative economic impact (Taiwo & Zubair, 2022). Foreign investment is discouraged by political instability because investors want stable settings in which to operate. This underinvestment restricts the development of jobs, lowers productivity, and impedes economic growth. Political unrest also causes a brain drain, in which highly qualified individuals leave for nations with more stable political environments, thereby reducing the human capital of the host country.

Moreover, political unrest interferes with the execution of economic policies and initiatives, which makes long-term development strategies challenging (Aisen & Veiga, 2010). Because of this discrepancy, businesses find it difficult to plan ahead and make investments. Because people in positions of authority frequently put their own interests ahead of those of the country, corruption thrives in politically unstable settings. Corruption further undermines economic progress by taking funds away from vital infrastructure and public services.

Economic diversification initiatives are further hampered by political instability since political survival in the near term is frequently prioritized over long-term economic growth. Due to its continued reliance on oil exports, Nigeria's economy is susceptible to changes in the price of crude oil throughout the world. A critical assessment of political stability's influence on the expansion of the Nigerian economy is urgently needed, given the importance of political stability to economic progress. Through an analysis of historical patterns, theoretical foundations, and empirical data, this research aims to expand on our knowledge of the intricate relationships between Nigerian politics and economy.

This study prepares the backdrop for a thorough assessment of how political instability affects the growth of Nigerian economy, examining the mechanisms through which instability affects economic activities and the specific economic sectors that have been most impacted, placing the research within its theoretical framework, historical context, and current problems. 

1.2 Statement of the Problem

Political instability has been a recurring issue in Nigeria, affecting its economic growth and development. This instability, characterized by frequent changes in government, political violence, corruption, and ineffective governance, has created an environment of uncertainty that hinders economic progress. Political instability disrupts the economic environment in several ways. It undermines investor confidence, disrupts economic policies, and diverts resources away from productive activities. These effects can be seen in reduced foreign direct investment (FDI), increased capital flight, and a general slowdown in economic activities. (Alesina et al.1996). Uncertainty brought on by political unrest deters investment, both domestically and internationally. When political instability poses less of a danger, investors want stable countries. Significant swings in foreign direct investment have been observed in Nigeria, coinciding with periods of political stability and instability. For instance, during the 2015 elections and the ensuing economic downturn, foreign direct investment inflows to Nigeria drastically decreased (UNCTAD, 2018).

Nigeria has a lot of natural resources and the capacity to grow economically (Ministry of Foreign Affairs, 2021), but political instability has in ways obstructed the nation's ability to achieve sustainable economic development. The nation's history of political turmoil, military takeovers, and civil war has made doing business insecure, deterred foreign investment, and hampered the execution of economic policies. With these factors well avowed, almost so little has been comprehensively written to connect the dots of political instability to the growth of economy. looking at this, the researcher set out to galvanize this aspect and provide concrete research to marry the missing leads and connect the dots of political instability with the economy of Nigeria. 

Furthermore, economic vulnerabilities are made worse by a lack of consistency and continuity in policy in the face of political shifts, which results in inefficient public service delivery, market distortions, and inadequate resource allocation. Important industries including infrastructure development, healthcare, education, and agriculture are underfunded and neglected, which exacerbates structural limitations and impedes attempts to reduce poverty and promote inclusive growth.

Abrupt changes in economic policies are frequently the result of frequent changes in government. Different administrations in Nigeria have implemented policies inconsistently due to their varied economic ambitions. This discrepancy might cause ongoing projects to fail and jeopardize long-term economic planning. For example, there were major policy changes during the 2015 transition from President Goodluck Jonathan to President Muhammadu Buhari, especially in the oil and foreign exchange management sectors, which had an impact on economic stability (Central Bank of Nigeria, 2017).

Nigeria's economy has grown significantly and negatively as a result of political instability. Political instability produces a climate of uncertainty that impedes economic progress by eroding investor confidence, upsetting economic policies, and diverting resources away from beneficial purposes. The manufacturing, oil and gas, and agricultural industries have been notably impacted, which reflects how widespread and pervasive the problem is. Nigeria must address its political instability by implementing stronger governance, anti-corruption initiatives, and dispute resolution procedures in order to create a stable atmosphere that is favorable to economic expansion. Therefore, the main issue that has to be resolved is the requirement to thoroughly assess the effect that political instability has on the expansion of the Nigerian economy, pinpoint the fundamental mechanisms and channels that allow it to do so,

1.3 Objectives of the Study

To assess the relationship between economic growth and political instability.

To determine the main processes by which political uncertainty affects economic performance.

To investigate the sector-by-sector effects of political instability on the economy of Nigeria.

To determine the economic costs of political instability over time

To investigate the connection between Nigeria's economic expansion and political unrest.

Research Questions

What relationship existed between economic growth and political instability between?

What are the ways by which political uncertainty affects economic performance?

What are the effects of political instability on the economy of Nigeria given different sectors of the economy?

What are the economic costs of political instability over time?

What is the connection between Nigeria's economic expansion and political unrest?

1.5 Significance of the Study

Owing to the potency of economy in every society and the reality that economy is the bedrock of every society, this research work holds so much value for a country that is yet to recover from a series of unrests that had plunged it into economic quagmire. In consonant with this, the political terrain cannot be balanced, as most policies that make for these unrest are from the corridor of power. Hence, this research seeks to serve as an eye opener for those in the corridor power. The research presents an assessment of the relationship that exist between economic growth and political instability while also determining the main processes which uncertainty affects economic performance. The study also investigates into the sector-by-sector effects of political instability on the economy of Nigeria. The study goes further to determine the economic cost of political instability over the years while investigating the connections between Nigeria’s economic expansion and political instability.

1.6 Scope of the Study

This study is bounded by a political and economic theme which encompasses factors that collectively make for the objectives of this research. Notwithstanding, socio-economic factors may have crept in a bit, the researcher carefully adhered to the thematic scope to avoid undue digression. This study does not have a define timeframe which gives the researcher the privilege of broadening his scope to embody different administrative eras. This study is centered on Nigeria and the Nigerian political and economic terrain.

1.7 Limitations of the study

Just like most research projects, this one also was faced with different limitations, which didn’t hinder the quality of the work done. For instance, the researcher could not be given access to some individuals in positions of authority as they conceived the research might leak some restricted information. In situations like this, the researcher only made do with the available information which leaves room for further research on the subject matter. Also, the financial aspect really was a thing. The researcher felt the economic fiasco being faced by the nation at the time of embarking on the research. This singular factor limited the researcher from reaching targeted regions to source eyewitness accounts. In instances like this, the researcher banked on social media to reach out to some of these targeted audiences, while others proved uncooperative.

1.8 Research Methodology

The researcher used a qualitative study design to navigate and comprehend the complex administrative problems related to the critical assessment of the impact of political instability on the growth of the Nigerian economy. Qualitative approaches are ideal for examining the subtleties, situations, and fundamental causes of these problems. This method involves gathering data from sources such as government departments in order to increase the validity of this work.

1.9 Definition of Terms

To better understand the topic under consideration, it is pertinent to espouse certain terms.

Political Stability: to understand political stability in the light of this study, it worthy to see it as a state pf affair where the government is able to manage the affairs of the state against conflict and insurrections of any kind

Economic growth: Generally, it implies the increase in production of goods and services which can best be measured in GDP. In this context it implies progression of economy from micro to macro.