Terrorism and financial flows in Africa

African countries amidst low credit security, low-income level and sub-optimal growth outcomes are facing many challenges on the incidence of terrorism and how to combat it. The increased terrorist incident in Africa has structural implications for a continent that has relied heavily on foreign inflow to jump-start and augment her developmental process. This paper leaned empirical credence to the terrorism-financial flow literature by estimating cross-country data on indices of terrorism and financial flows. We employed the Pooled Mean Group (PMG) estimation procedure and found the long-run negative relationship among the increase in the number of terror incidents foreign direct investment, remittances inflow and portfolio investment. Short-run estimates show that military expenditure is positive and statistically significant for all indices of financial flow (foreign direct investment, remittances, official development assistance and portfolio investment) in Africa. Based on the findings, we recommend that counter-terrorism policymakers should employ in specific terms, targeted measures, to attack the socio-economic roots of terrorism, that improve the fiscal responsibility, control inflation and all policy components will help to reduce the threat of terrorism and aid improve financial flows to Africa.