Why Somalia’s biggest threat lies within

Even more damaging is the persistent capital flight where wealth generated within Somalia is transferred to neighbouring nations and abroad, draining the country of investment resources that could otherwise stimulate job creation, infrastructure development, and economic growth.

This economic hemorrhaging, coupled with high unemployment and a lack of domestic opportunities, has entrenched poverty and left the majority of Somalia’s youth with little hope for the future.

Today, Somalia has one of the highest youth unemployment rates in the world. It estimated that up to 60 percent of young people in Somalia are jobless or unable to find work. This presents a dangerous and unsustainable life scenario for both the country and those affected.

Besides manipulation by terror merchants, the psychological and sociological impacts of a country inhabited by the unemployed, out of work and disillusioned young people are well documented in other nations, and that is a route Somalia should not dare go.

High taxation is driving capital flight by crushing private enterprise and fueling a climate of fear and mistrust. In a country with weak governance, unclear investment policies and little transparency, taxes are often arbitrarily imposed and enforced by corrupt officials who extort businesses under the guise of legality.

Entrepreneurs face multiple layers of taxation (from federal, state, and even militant actors such as Al-Shabaab) each demanding a cut, with no corresponding delivery of services or infrastructure.

Excessive and often informal taxes stifle investment and innovation. Business owners, wary of erratic costs and harassment, increasingly move their capital abroad to safer, more stable environments.

Somalia is losing capital (an estimated $1.6 billion annually) draining vital resources needed for infrastructure, public services, and local business development. This exodus of investment erodes the country’s economic base, directly undermining its financial sovereignty.

The economic toll is stark; capital flight fuels inflation, weakens the Somali shilling, and destabilises domestic currency market. As a result, the country has become even more dependent on the World Bank, IMF, foreign aid, and diaspora remittances (over $2 billion annually) exposing its fiscal fragility and weakening the nation’s credibility on the global stage.

Meanwhile, neighbouring Kenya is reaping the benefits. Somali capital is transforming Nairobi into a regional financial hub. Eastleigh and South C neighbourhoods are now economic enclaves of Somali-owned businesses.

In 2023 alone, Somali investors accounted for over 35 percent of new hotel investments in Nairobi, dominating real estate, hospitality, and retail. This outflow centralises economic power outside Somalia, entrenching regional disparities and marginalising Mogadishu.

London, Kuala Lumpur and Gulf banking hubs such as Oman, Djibouti and Dubai are some of the beneficiaries of Somalia’s capital flight. Assets are held in Egypt, Turkey, Saudi Arabia and other places by Somali entrepreneurs and political elite because they do not trust investment opportunities and security at home.

Somalia must strengthen its financial regulatory frameworks, enforce anti-corruption laws, and build credible, transparent institutions.

Unless capital retention is prioritised, Somalia risks permanent economic exile fueling dependency, exporting wealth, and surrendering sovereignty to better-governed neighbors.

If those in power refuse to prioritise domestic investment and financial transparency, then they are complicit in the economic collapse they claim to fight.

It is time to stop pretending that Somalia’s greatest threat is external. The real danger lies within; a governing class that has normalised export of wealth and talent while offering nothing but slogans in return.

The writer is an economic journalist.