Democracy Lab

The Boko Haram Economy

Nigeria now boasts the largest economy in Africa. So why are homegrown terrorists thriving?

How a country's fortunes can change in a matter of several months. Nigeria started 2014 ready to celebrate becoming Africa's largest economy, albeit by updating (rebasing) the standard measure of economic size, GDP. Unfortunately, the festivities were short-lived. In the ensuing months, the rapidly escalating Boko Haram insurgency exposed to all the country's many weaknesses and deep dysfunction that had been partially obscured in recent years by surging oil revenues. While seemingly separate events, the announcement of Nigeria's newly acquired economic status and the stepped-up insurgency are intimately related.

Upon release of the new economic figures, the Nigerian government was taken aback by the popular backlash. It is rare that an arcane statistical exercise such as the rebasing of official output statistics stirs up so much popular attention. Simply put, a nation rebases its GDP statistics to provide as up-to-date a picture of its economy as possible. Rebasing incorporates into the GDP new activities undertaken since the previous base year. The new calculations also account for shifts in the composition of output resulting from differing rates of growth among economic sectors.

The last time Nigeria undertook a base-year exercise was in 1990. Its new 2014 base year now includes previously neglected industries like telecoms, information technology, music, online sales, airlines, film production, and a whole spectrum of related services in its GDP statistics. The new calculations put Nigeria's 2013 GDP at $510 billion, as opposed to $264 billion before rebasing.

But did anything really change? The simple answer is no. The Nigerian economy has not grown by 80 percent overnight. Nigerians are no richer than they were before the GDP figures were revised. Rebasing is simply a realignment of the figures to reflect the present reality.

Nigeria's growth performance under trying circumstances over the last decade might have been expected to win accolades for the government. And, in fact, the prestigious international publication the Economist observed that "Nigeria now looks like an economy to take seriously." But for most Nigerians, the new figures simply do not mesh with day-to-day economic realities. For them, the country's great infrastructure and inequality gaps continue, as in the past, to act as brakes on growth.

Another telling sign is Nigeria's ranking in the 2013 Positive Peace Index (PPI), which measures "the strength of the attitudes of 126 nations to determine their capacity to create and maintain a peaceful society," and which ranked Nigeria 122th among 126 countries. (To investors, the new growth figures highlight the lack of diversification of government revenues -- which could elevate sovereign risk.)

Former French President Nicolas Sarkozy once warned that "nothing is more destructive than the gap between people's perceptions of their own day-to-day economic well-being and what politicians and statisticians are telling them about the economy." If anything, the new base figures bring home the unpleasant truth that Nigeria, for all its wealth, has done little to improve living standards for the majority of its population. 

Living in the largest economy in Africa means little to the tens of millions struggling with routine power cuts, recurring fuel shortages, persistent unemployment, and rising inequality. An estimated 60 percent of Nigerians live on less than $1 a day, compared with 20 percent of South Africans. The United Nations Development Program ranked Nigeria 80th of 108 developing nations in a poverty survey that focused on severe deprivation. The country scored below resource-poor economies like Rwanda and Malawi in the survey, which examined not just income destitution, but also education, access to health care, standards of living, and life expectancy. The implication is clear: Nigeria has grown rapidly in recent years, but the country has not developed.

Even before the rebasing exercise, Nigeria's social spending ranked among the lowest in the world. In 2011, health spending represented barely 2 percent of GDP. After rebasing, the figure falls to less than 1 percent. Rebasing also highlights the weakness of Nigeria's tax system, with tax mobilization accounting for only 10 percent of GDP -- one of the lowest rates in the world. Furthermore, while Nigeria has an extremely energetic and talented entrepreneurial class, most never have a chance to start a business. In a World Bank report on the ease of doing business, Nigeria scored 147th of 189 countries, while South Africa came in at an impressive 41st.

Nigeria's patterns of governance are consistent with the growth-without-development thesis. And, in fact, the country is notorious for its level of corruption. Shortly before the rebasing exercise, President Goodluck Jonathan fired the respected head of the central bank, Lamido Sanusi, who was trying to track down $20 billion in oil revenue that went missing from the treasury. Sanusi's dismissal reinforced public suspicions that politicians and their supporters have been helping themselves to the country's oil largess.

Nigeria's deficient governance may be the key factor preventing the country from moving up the development ladder. Typically, as countries develop and their economies become more sophisticated and resilient, there is a steady improvement in governance scores. However, progress in Nigeria has been minimal since the restoration of democracy in 1999. According to the World Bank's 2012 Governance Indicators, Nigeria ranked in the 10.4th percentile (that is, approximately 90 percent of countries ranked higher) for rule of law, compared to South Africa's 57.8th percentile. In terms of government effectiveness, Nigeria ranked in the 15.8th percentile, compared to South Africa's 57.8th percentile. The gap in corruption was of a similar magnitude, with Nigeria in the 11th percentile versus 53.6th for South Africa. Perhaps most ironically, after becoming a democracy, Nigeria's voice and accountability ranking fell from 30.3 percent in 2000 to 27.5 percent in 2012.

Rightly or wrongly, the rebasing results combined with reports of "lost" oil money confirm most Nigerians' worst suspicions: The system is rigged to provide gains for the elites at the expense of the general populace. With 63 percent of the population under 25 and youth unemployment at around 37 percent, this theme has struck a chord with the country's young, marginalized workers. This pool of marginalized youth is larger in the economically depressed north than in the more prosperous south and is the backbone of Nigeria's Islamic insurgency movement, Boko Haram.

The northeastern states of Adawama, Yobe, and Borno, where Boko Haram thrives and carries out its terrorist activities with increasing brutality, once had a thriving economy comprised of textiles and palm oil industries. These economic activities went into decline in the 1970s, when the focus of investment shifted towards the southern oil industry, and fell even further in the mid-1990s, when globalization began flooding the country with cheap imports.

Today, Adawama and Yobe are among the poorest states in Nigeria, with poverty rates between 60 and 70 percent and unemployment at 35 percent. In Borno state, the birthplace of Boko Haram, only 2 percent of children under two are vaccinated, 83 percent of young people are illiterate, and 48.5 percent of children do not go to school. While unemployment, illiteracy, and marginalization may not directly cause youth violence or insurgency, these factors created a receptive audience for Boko Haram's fundamentalist Islamic ideology.

Boko Haram can be loosely translated as "Western education is sin." Boko Haram teaches that false, corrupt Muslims control northern Nigeria and that the establishment of an Islamic state with strict adherence to sharia law is the only way to remedy the situation. The group's deep hostility toward Western education stems from its perception that the relatively few educated Nigerians have misused their training for their personal gain, becoming politicians or power brokers who rob and oppress the masses. It also reflects Boko Haram's fundamentalist Muslim antipathy toward female education, as evidenced by the group's recent abduction of over 200 schoolgirls.

Boko Haram's founder, the charismatic cleric Mohammed Yusuf, initially tried to advance the group's agenda in a nonviolent manner, largely through providing a non-Western alternative education to male students to counter the government's Westernized primary and secondary schools. Ultimately, a series of clashes between Boko Haram members and police escalated into an armed insurrection in 2009. Government troops crushed the rebellion, killing hundreds of Boko Haram followers and destroying the group's principal mosque. Mohammed Yusuf was captured, handed over to the police, and shortly thereafter killed in an incident captured on video and posted on the Internet.

Boko Haram went underground. A year later, the group reemerged under the militant leader Abubakar Shekau, to revenge the killings of Yusuf and his followers by launching attacks on police officers, police stations, and military barracks. Violence has since escalated into wholesale terrorism, often involving women and children. The insurrection has resulted in more than 10,000 deaths, displaced close to half a million people, destroyed hundreds of schools and government buildings, and devastated the already ravaged economy of the north.

Boko Haram attracts local support by tapping into the very real governance, corruption, and underdevelopment grievances shared by most people in northern Nigeria, creating a vicious circle whereby violence and destruction create additional unemployment and, thereby, new recruits. To break this cycle, Nigeria's finance minister, Ngozi Okonjo-Iweala, recently announced that the government was working to obtain donor backing for a special development plan for the northeast, acknowledging that, "... this is an inclusion problem ... the fact that the human development indicators in that part of the country are among the lowest."

Nigeria is at a turning point, and its future may well depend on the strength of the government's commitment to this and similar programs aimed at more equitably distributing the country's oil wealth through investment in broad-based development. While Nigeria is currently the largest economy in Africa, its growth will be increasingly constrained if its poor governance structures continue to go unaddressed. If the government instead continues using oil revenues to produce pockets of wealth and short-term spurts of growth, the Boko Haram insurgency will almost certainly spread and pull the economy down with it. To defeat Boko Haram, the government must undermine its support by both improving governance and addressing the grievances of the marginalized. Ironically, it is this same strategy that would enable Nigeria to become not just Africa's largest economy, but its most prosperous.

Photo: PIUS UTOMI EKPEI/AFP/Getty Images

Argument

Cómo Se Dice, 'Lost in Translation'?

On immigration, drugs, and virtually every other pressing policy issue, why can’t the United States and Mexico stop talking past each other?

By now, the number is well known: From October 2013 to June 15 of this year, 52,000 unaccompanied children and teenagers were caught at the American border with Mexico, twice the number for the same period in the previous year. Responding to the influx of young migrants and the public outcry they've provoked, President Barack Obama has asked Congress to provide nearly $4 billion to establish new detention facilities, increase aerial surveillance capacity, and hire more immigration judges to speed up the processing of the detained. The proposal has been met with skepticism, not only from Obama's political opponents, but also from immigration activists who argue that it is yet another example of the U.S. effort to stem the flow of migrants without addressing the systemic problems in Central America -- gang violence, weak rule of law, limited economic opportunity -- that motivate their flight.

And worrying to many experts is the fact that the policy was developed with little input from the country through which these migrants enter America.

Although commercially entwined and geographically intimate, Mexico and the United States are stuck in a dysfunctional bilateral rut. Immigration, drug violence, and a recalibrated balance of trade have their leaders talking past each other -- when they talk at all. After 18 months in office -- one-fourth of his term -- Mexican President Enrique Peña Nieto had not spent more than 24 hours in the United States.

The relationship is undermined by politics and also by perception: These countries -- and their citizens -- simply don't get one another. From their perch north of the Rio Grande, Americans fail to acknowledge that the debate on immigration is also one of emigration. Mexicans, for their part, view U.S. law enforcement efforts to address drug trafficking with suspicion. Indeed, the efficacy of policies on both sides of the border is weakened by a misunderstanding of national interests, cultures, and histories.

The neighbors' failure to empathize with one another is all the more troubling given their mutual reliance: Around 11 million Mexicans live in America and send $20 billion a year to their relatives back home. (According to a recent Pew Research Center study, "the U.S. has more immigrants from Mexico alone ... than any other country has immigrants," period.) One million Americans live in Mexico, more than in any other country. Trade between the countries amounts to almost $500 billion a year, or five times the figure from before the North American Free Trade Agreement (NAFTA) went into effect 20 years ago. Mexico is America's No. 2 commercial partner, right after Canada; the United States is No. 1 for Mexico, and investment from the United States represents half of all foreign investment there in the past 13 years.

Meanwhile, 300 million people cross Mexico's northern border legally each year. A billion dollars in goods cross it every day via 45 different ports of entry. The 2,000 miles between Matamoros and Tijuana, Brownsville and San Diego form the busiest border in the world.

All of this adds up to an urgent reality check: The opportunity cost of a failure by the two countries to solve their shared problems -- and leverage their collective advantages -- could be ruinous.

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North Americans feel little in the way of continental identity. Late last year, the Center for North American Studies at American University did a survey in Canada, Mexico, and the United States. Asked to which group they felt they belonged first and foremost, North Americans said they belonged mainly to their country, state, or town. Eleven percent saw themselves as citizens of the world. Only 3 percent identified themselves as belonging to North America.

So what do Americans and Mexicans see as they gaze across their shared border? Americans, in particular, are surprisingly uninformed about their southern neighbor: Only 20 percent of Americans know that Mexico is a top-five trading partner of the United States, according to a Chicago Council on Global Affairs report. When asked as part of the 2013 American University survey which countries are the largest export markets for U.S. goods, Americans said China and Japan -- when in fact the United States actually exports more to Mexico than to China and Japan combined.

But the problem extends well beyond ignorance of facts; there's also the matter of plain old dislike. Sixty-five percent of Mexicans view the United States favorably, but 52 percent of Americans view Mexico unfavorably, according to the latest data from the Pew Global Attitudes Project. The Chicago Council on Global Affairs survey puts at 32 (100 being the most favorable) Americans' opinion of their southern neighbor, 18 points down from the same survey 10 years ago.

Immigration is the main driver of Americans' negative view of Mexico, while the secondary one is violence triggered by Mexico's war against drug cartels. Gruesome images of that war proliferate in the American media. But in reality (and unbeknownst to most Americans, it seems) immigration and violence -- a lethal cocktail profoundly affecting Mexico -- can be traced in no small part back to the United States. Mexico is the largest provider of illegal drugs to a hungry U.S. market, and American firearms dealers are the largest supplier of weapons to Mexicans, including criminals.

Under Felipe Calderón, who served as Mexico's president from 2006 to 2012, U.S. intelligence and law enforcement agencies enjoyed unprecedented access to their Mexican counterparts, as joint operations and tasks forces were put in place. In return, Calderón asked only that the United States stanch the illegal flow of firearms into Mexico. According to the Bureau of Alcohol, Tobacco, Firearms and Explosives, between 2007 and 2011 Mexico recovered and submitted nearly 100,000 firearms to ATF for tracing; more than 68,000 came from sources in the United States.

Not only were Calderón's pleas never heeded, but the ATF launched an operation in which it deliberately allowed some 2,000 guns to be purchased in the United States and brought into Mexico as part of a sting operation. When Operation Fast and Furious was revealed in 2011, it emerged that some of those guns were used in a massacre in Ciudad Juárez, where a drug gang murdered 15 Mexican children.

From Mexico's perspective, the illegal entrants classified by the United States as OTMs, or "other than Mexicans" -- the Guatemalans, Salvadorans, and Hondurans passing through Mexico to cross illegally into the United States -- are a humanitarian and law-enforcement calamity, providing both victims and recruits for criminal cartels in Mexico itself. According to the Mexican Human Rights Commission, every year at least 11,000 Central American migrants become victims of Mexican criminal organizations that kidnap them for ransoms demanded from their family members in the United States. (The humanitarian disaster is perhaps best exemplified by the 2010 massacre of 72 migrants in San Fernando, Tamaulipas, a small town close to the U.S.-Mexico border, at the hands of the Zetas, a bloody drug cartel turned human-trafficking organization.)

Also providing fodder for Mexican cartels, since 2008, U.S. Immigration and Customs Enforcement has increased deportations of illegal aliens under a policy to maximize "the removal of those who pose the greatest threat to public safety or national security." According to the latest U.S. government figures, about 450,000 Mexicans who committed crimes in the United States were returned home between 2008 and 2011, under a program called Rapid REPAT, offering undocumented immigrants convicted of criminal offenses early release in exchange for immediate repatriation. As America un-burdens its justice system, Mexico absorbs fresh waves of criminal recruits for the cartels.

Tijuana, a city of about 1.5 million people, has received some 150,000 deportees in the last four years. Most linger there or in nearby cities, with no job prospects, looking for a way to go back to the United States. The cartels scoop them up. In 2007, members of the city's leading drug cartel fired 200 shots at the home of Alberto Capella, an activist who had organized rallies there to protest the lack of security. After the siege, when the mayor asked Capella to abandon his NGO and put on a uniform, he agreed, serving as the chief of police there from 2010 to 2013. He made strides in reducing homicides and kidnappings, but by the end of his term, the hundreds of Mexicans being deported every day from San Diego, often at night and with no prior warning, were his most pressing concern. Similar situations persist in cities all along the Mexican border.

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Where Washington sees the need for more fences, police, and drones, both the United States and Mexico would actually benefit from improved border infrastructure. The Tijuana-San Diego region is home to the busiest and most inefficient stretch of border in the world. In 2010, the San Diego Association of Governments and the California Department of Transportation estimated that delays at the border cost the state of California around $4 billion and more than 25,000 jobs a year. A U.S.-Mexican agreement to reduce waiting times faltered after the economic crisis and the U.S. budget sequester. Lines are still two and three hours long at peak times.

To make matters worse, despite shared interests, collaboration between the two governments has deteriorated since Peña Nieto took office. The Mexican government created what it called a "one-stop window" in the Interior Ministry, disallowing direct contacts between individual agencies. The Americans complained, and the policy has since been relaxed somewhat. But tensions persist. When justice officials in the United States asked for the extradition of Joaquín "Chapo" Guzmán, a notorious drug kingpin arrested in February, as had been granted with many cartel bosses during the Calderón administration, the Mexican government answered with a clear refusal.

In a recent interview with the Spanish newspaper El País, Peña Nieto spoke openly about what he called "inconsistency" from the United States in the drug war, in which Washington asks other countries to combat drug cartels while, state by state, marijuana becomes legal in America. Peña Nieto said, "[W]e cannot continue on this path of inconsistency between legalization that has occurred in some parts, especially in the largest consumer market, which is the U.S., and we in Mexico continue criminalizing marijuana production."

By contrast, however, Peña Nieto has been hesitant to criticize U.S. immigration policy head-on. In May 2013, when questioned about Washington's impending immigration bill, Peña Nieto provided a terse two-word answer to the press: Immigration policy was a "domestic affair" of the United States.

The fault lines for the continental frenemies, however, go well beyond immigration and drugs. The United States and Mexico trade $1.4 billion every single day thanks to NAFTA. Yet the agreement isn't just about trade: It accords Mexico an equal seat at the continental table -- formal partnership in a bloc of three in which Mexico was to be as respected an interlocutor as Canada. When the pact was being negotiated, Americans were eager to include rules allowing their investment in oil and electricity in Mexico, two sectors in which the country had among the most restrictive rules in the world. Since then, Mexico has modified its constitution and is in the process of approving laws to allow private and foreign investment in oil and electricity. But it may be too late for that deal to be a new, genuine driver of bilateral progress.

For the first time in decades, during the first trimester of 2014, the oil trade balance between the two countries favored the United States -- by $551 million. The opening of the oil market will be attractive to American companies, but it is no longer a strategic imperative for their government, as it was 20 years ago when America was more dependent on foreign oil.

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Amid all the policy confusion, there are signs that Mexicans' regard for the United States, while still better than the reverse view, may be waning. Just days before this year's World Cup, the New York Times published a poll of 19 countries participating in the tournament. When asked which team they would be rooting against, Mexicans' top answer was the United States. (This isn't the first sporting event where divisiveness has been on display: In the 2002 World Cup, the U.S. team eliminated Mexico. A couple of years later, Mexicans fans chanted "¡Osama, Osama!" during a game, invoking the name of America's chief international nemesis.)

The unsportsmanlike tone hints at the larger dysfunction -- and the impact that dysfunction might have, if it is not addressed. An inefficient border that costs millions every day; a senseless immigration policy from Central America to California that exacts an unacceptable price in terms of human suffering and lives; resentment and suspicion that undermine a common policy to deal with drugs, guns, and crime; allowing the cartels to grow, kill, and prosper; and a failure to cultivate complementary regional labor markets that could help spur growth on both sides of the border.

Before NAFTA, the United States and Mexico worked together for peace in Central America. They then crafted an immigration and labor agreement that recognized the realities of both countries -- but that was eventually frustrated by 9/11. Since then, things have only soured.

Today, Peña Nieto is the first Mexican president in more than 30 years who has not studied or lived in the United States or any other country. His English is middling. Meanwhile, embattled by an economic crisis and his effort to wind down two wars in the Middle East, Obama has never placed Mexico high on his agenda. In other words, the administrations of both countries are looking inward. If they don't look toward each other with a desire to understand and cooperate, the two countries will stand to lose a lot more than just a friendly neighbor.

John Moore/Getty Images