This study examined the political economy of terrorism in Nigeria, focusing on the Boko Haram insurgency through the lenses of Relative Deprivation Theory and Frustration–Aggression Theory. The study investigated the factors responsible for the emergence and persistence of Boko Haram, its socio-economic and governance implications, and the effectiveness of Nigeria’s counter-terrorism strategies. A qualitative research design was adopted, relying on secondary data obtained from journal articles, textbooks, policy reports, and relevant online sources. Findings revealed that Boko Haram’s rise is closely linked to widespread poverty, unemployment, corruption, weak governance, political exclusion, and regional inequalities in northern Nigeria. These conditions created feelings of deprivation, marginalization, and frustration among affected populations, thereby facilitating recruitment into extremist movements. The study further found that the insurgency has significantly undermined socio-economic development through the destruction of infrastructure, disruption of education and economic activities, mass displacement, humanitarian crises, and weakened state institutions, particularly in the North-East region. These consequences have deepened existing inequalities and reinforced cycles of poverty and insecurity. The study also revealed that although Nigeria’s counter-terrorism efforts have recorded some military successes in reducing Boko Haram’s territorial control and operational capacity, they have largely failed to address the underlying structural drivers of the insurgency. Consequently, Boko Haram has continued to persist in various adaptive forms. The study concluded that Boko Haram represents not only a security threat but also a manifestation of deeper socio-economic and governance challenges. It recommended, among others, targeted poverty reduction programmes, youth empowerment initiatives, improved access to education and vocational training, and strengthened governance reforms to address the root causes of terrorism and promote sustainable peace and development in Nigeria.