Insurance Premium And Economic Performance In Nigeria: A Variance Decomposition Approach
DOI:
https://doi.org/10.14738/abr.73.2.6360Abstract
This study assessed insurance premium and Nigeria’s economic performance. It aimed at finding out the relationship insurance premium, investment and assets have with Nigeria’s GDP. Descriptive statistics, Augmented Dickey Fuller Unit Root Test, Johansen cointegration, OLS regression, variance decomposition and granger causality tests were adopted. Findings revealed that all the series are significant and but not normally distributed. The correlation matrix shows that there is high and positive correlation between the independent variables. The results of the unit root tests using Augmented Dickey-Fuller test show that all the variables do not have unit roots (that is, are stationary) at 5% in their first differences. The Johansen co-integration result confirms that there is long run relationship between insurance activities and economic growth in Nigeria. The OLS result suggests that 93.11 percent of the total variation found in GDP is explained by the presence of total assets, investments and premium of the insurance industry sector while the F-Statistics has a value of 163.1080 which is highly significant at 5% confidence level implying that insurance industry play significant role in development of the Nigerian economy. The Variance Decomposition for 10 period indicates that Insurance sector investment is more significant than premium for most of the periods. However, since premium represents revenue for the insurance industry it has positive impact on GDP for all the periods while GDP responds positively. This granger causality result shows that there is granger causality relationship between insurance premium, investment and assets have granger causality with GDP. From the findings, it recommends that insurance business authorities should review its reform policy and ensure that policies that will strengthen premium mobilization in Nigeria are put in place. Insurance companies need to invest more of their funds in productive sectors of the economy.
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Total Investment, assets and premium of the insurance industry and GDP Year GDP Total investment of Insurance Insurance Industry Total asset of industry Premium Insurance industry 1981 94325.02 145.453 234.05 1014.25 1982 101011.23 190.389 248.77 1138.42 1983 110064.03 169.496 191.80 1106.13 1984 116272.18 199.519 205.69 1333.88 1985 134585.59 277.681 195.29 1934.48 1986 134603.32 290.626 254.16 2487.99 1987 193126.20 324.225 406.50 2651.50 1988 263294.46 326.049 486.65 4255.90 1989 382261.49 414.653 673.09 5290.83 1990 472648.75 498.160 1013.67 6333.74 1991 545672.41 987.437 1296.24 6628.38 1992 875342.52 5094.023 2445.69 10166.73 1993 1089679.72 2,078.444 4931.92 20329.96 1994 1399703.22 1817.680 14519.15 23220.86 1995 2907358.18 4232.125 13525.13 17155.20 1996 4032300.34 12379.46 11091.33 15276.92 1997 4189249.77 13613.08 10941.58 20079.63 1998 3989450.28 15656.88 11688.25 22578.89 1999 4679212.05 21583.46 14597.28 50131.65 2000 6713574.84 25192.64 22531.46 61600.00 2001 6895198.33 32157.27 28981.29 78060.48 2002 7795758.35 36940.87 37765.89 85255.73 2003 9913518.19 54642.84 43441.81 124267.37 2004 11411066.91 74590.75 50100.83 141222.03 2005 14610881.45 121844.22 67465.56 203113.12 2006 18564594.73 216359.91 81583.75 307542.61 2007 20657317.67 329247.93 89104.89 427497.16 2008 24296329.29 336491.38 126470.30 573154.46 2009 24794238.66 148083.88 153127.12 586459.54 2010 54204795.12 100239.95 157336.81 585015.79 2011 63258579.00 103573.1 175756.75 621095.14 2012 71186534.89 106384.456 366,657.8 3150089.60 2013 80222128.32 133915.194 119,652.4 4058087.31 2014 89043615.26 245002.634 288478.3 3840077.06 2015 94144960.45 266171.959 332664.1 5302879.35 2016 101489492.20 394819.591 377932.77 6158947.80 2017 113719048.23 547982.940 400687.22 7515351.41
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