The study examined the cost of internal security and socio-economic development in Nigeria. The cost of managing and controlling insurgency and cost rehabilitating ex-militant were adopted as proxies of cost of internal security, while socio-economic development was examine using total expenditure for education and total expenditure for health. The study deplored an ex-post facto research design with time series data collected from the annual budget reports of the Ministry of Budget and National Planning, the annual reports of the Ministry of Defense, and the World Bank statistical database for period 2001-2020. The study utilized the Ordinary Least Square (OLS) regression techniques, among other tools, to test the postulated hypotheses, and analyses were done via Eviews 9. The finding revealed that cost of managing internal security has significant effect on socio-economic development in Nigeria. Specifically, the study found that the cost of managing insurgency has a statistically significant effect on total expenditure for education. Also, cost of rehabilitation of ex-militants has significant effect on total expenditure for health. The study advanced that new policies be adopted to address Nigeria's security situation in order to boost socio-economic development. Also, Government must be proactive and intensify measures in dealing with security issues, challenges and threats, through modern methods which include use of information communication technology for intelligence gathering, and sharing information among security agencies. Government should provide adequate training of security personnel, logistics, motivation, and deployment of advanced technology in order to manage security challenges.