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Non-Life Insurance Premiums and Capital Formation in Nigeria

Aleibiri, Hannah Tarilayefa, Josiah Boulo-owei Edike PhD

Abstract

This study examined the impact of non-life insurance premiums on gross fixed capital formation in Nigeria from 1990 to 2024. Using annual time series data from the Central Bank of Nigeria, NAICOM, and the World Bank, the research disaggregated non-life insurance into five categories: accident, employers' liability, fire, marine and aviation, and motor insurance premiums adopting the Ex-post facto research design. The Autoregressive Distributed Lag bounds testing approach and error correction model were employed to analyze both short-run dynamics and long-run relationships. The bounds test confirmed a long-run cointegrating relationship among the variables. Error correction model results showed that among all insurance categories, only fire insurance premiums exerted a statistically significant positive effect on GFCF in the short run. Accident, employers' liability, marine and aviation, and motor insurance premiums showed no significant effects. The error correction term was negative and significant, indicating rapid adjustment to long-run equilibrium. Diagnostic tests confirmed model stability and reliability. The study concluded that non-life insurance contributed to capital formation in a highly product-specific manner, with fire insurance serving as the most effective channel. Based on these findings, it was recommended that policymakers and insurers prioritize promoting fire insurance through awareness campaigns and simplified claims procedures to stimulate productive investment. For other insurance categories, targeted strategies such as product bundling with investment-focused packages, sector-specific education, and integration with broader risk management frameworks were recommended to enhance their impact on capital formation. These interventions would strengthen the insurance sector's role in mobilizing domestic resources for economic development in Nigeria.

Keywords

Non-life insurance premiumsGross fixed capital formationNigeriaARDL bounds testing and Capital formation dynamics

References

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