Impact of Crime on Economic Performance in Nigeria: An Autoregressive Distributed Lag Approach (1990- 2024)

Abstract

Crime and insecurity constitute persistent challenges to economic performance in Nigeria because they can disrupt productive activities, discourage investment, increase security-related expenditure, and weaken business confidence. At the same time, unemployment, inflation, and inadequate capital formation may interact with insecurity to influence overall economic outcomes. Despite growing concern about these relationships, limited evidence simultaneously evaluates the short-run and long-run effects of crime and key macroeconomic variables on Nigeria’s real gross domestic product over an extended period. This study examined the impact of crime on economic performance in Nigeria from 1990 to 2024. The study specifically investigated the effects of crime rate, unemployment rate, gross fixed capital formation, and inflation rate on real gross domestic product (RGDP), which was used as a proxy for economic performance. An ex post facto research design was adopted, and annual secondary data were obtained from relevant national and international statistical sources. The study employed the Autoregressive Distributed Lag (ARDL) technique to establish the short-run and long-run relationships among the variables. The unit root test results showed that the variables were integrated at mixed orders of I (0) and I (1), justifying the use of the ARDL approach. The bounds test confirmed the existence of a long-run relationship among the variables. The empirical results showed that the first lag of crime rate had a significant negative effect on economic performance in the short run, suggesting that criminal activity disrupts productive activities, discourages investment, destroys economic assets, and reduces the efficiency of economic resources. For unemployment, the contemporaneous and second-lag coefficients were negative and significant, whereas the first-lag coefficient was positive and significant. However, gross fixed capital formation and inflation exhibited mixed effects across the short and long runs. Crime recorded a positive long-run relationship with economic performance, contrary to conventional theoretical expectations. This unexpected finding may be associated with limitations in crime measurement, increased reporting of criminal activity, institutional factors, or the possibility that recorded crime statistics do not fully capture the economic costs of criminal activity in Nigeria. The study concludes that crime remains an important factor influencing economic performance, particularly in the short run. It therefore recommends stronger crime-prevention institutions, improved employment opportunities, increased productive investment, effective macroeconomic management, and enhanced mechanisms for collecting and reporting crime statistics to promote sustainable economic performance in Nigeria.