THE CONTRIBUTIONS OF INSURANCE INDUSTRY TO GROSS DOMESTIC PRODUCT (GDP) IN NIGERIA


THE CONTRIBUTIONS OF INSURANCE INDUSTRY TO GROSS DOMESTIC PRODUCT (GDP) IN NIGERIA

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ABSTRACT

This work examined the contributions of the insurance industry to the gross domestic product (GDP) in Nigeria. Data for the study were basically through the secondary process, extracted from journals, newspapers, internet, magazines, textbooks, CBN statistical Bulletin and Statement of Account etc. The Ordinary Least Square technique was used to test the validity of the hypotheses stated in the study. The research revealed that insurance industry through her routine activities has contributed significantly to economic growth of Nigeria. Through the signs from a priori expectation, it revealed a positive linear relationship between insurance contributions with gross domestic product (GDP) in Nigeria. However, the study revealed a negative relationship between total investments of insurance industry to gross domestic product. This is due the negligence of investment in the industry. Furthermore, the study exposed that neglect of laws governing insurance practise in Nigeria, poor accounting practice, poor claims settlement, failed public image, negligence of investment, low awareness of insurance etc as the major problems of the industry. The researcher recommended an increased supervisory role of NAICOM (National insurance commission), prompt payment of premiums, effective utilisation of insurance funds, research, improved public awareness through adverts and campaigns as possible solutions to the challenges facing the industry.

TABLE OF CONTENT

TITLE PAGE……………………………………………………………….i

APPROVAL PAGE…………………………………………………………ii

DEDICATION……………………………………………………………..iii

ACKNOWLEDGEMENT………………………………………………….iv

ABSTRACT…………………………………………………………………v

TABLE OF CONTENT…………………………………………………….vi

CHAPTER ONE

INTRODUCTION

1.1 Background of the study………………………………………….1

1.2 Statement of the problem…………………………………………..3

1.3 Objective of the study……………………………………………………………………… 5

1.4 Research hypotheses……………………………………………….6

1.5 Significance of the study……………………………………………7

1.6 Scope and limitations of the study…………………………………7

CHAPTER TWO

2.0 Literature Review

Introduction

2.1 Theoretical literature

2.1.2 The Evolution of modern Insurance Business in Nigeria….. 9

2.1.3 Concept of insurance business……………………………..11

2.1.4 Classification of insurance Business……………………………………. 13

2.1.5 The mechanism of insurance……………………………….14

2.1.6 The insurance industry and Nigerian Economy…………..15

2.1.7 The investment case for the insurance sector………………16

2.1.7.1 Key factors for prospects in the industry………………………… 17

2.1.7.2 Real sector growth………………………………………………………………. 18

2.1.7.3 Implications of government legislation……………………………… 18

2.1.8 Evolution of capital requirements in the insurance sector…20

2.1.8.1 Pre-recapitalisation/consolidation………………………….21

2.1.9 Contributions of insurance to the gross domestic product in Nigeria……………………………………………………………………………………. 22

2.1.10The insurance industry in Nigeria and the Financial Strategy (FSS) 2020………………………………27

2.1.10.1 Intended position of the industry……………………………………… 28

2.1.10.2 The way forward…………………………………………………………………. 29

2.1.10.3 The code of ethics…………………………………………..30

2.2 Empirical literature……………………………………………31

2.3 Limitations of the previous studies……………………………38

CHAPTER THREE

3.0 Research Methodology ………………………………………………39

3.1 Model specification…………………………………………40

3.2 Method of Evaluation………………………………………41

3.2.1 Evaluation Based on statistical criteria……………………42

3.2.2.1 Coefficient of multiple Determinations (R2)……………42

3.2.3 Evaluation Based on Econometric criteria…………………42

3.3 Co-integration and Error Correlation representation……44

3.4 Justification of the model……………………………………45

3.5 Data required and sources…………………………………..45

CHAPTER FOUR

4.0 Presentation and interpretation …………………………………..47

4.1 Unit root test…………………………………………………47

4.1.1 Co-integration Test…………………………………………48

4.2 Presentation of regression result……………………………..49

4.3 Economic a priori criteria…………………………………..50

4.3.1 Statistical criteria (first order test)……………………….51

4.3.1.1 Coefficient of multiple determinations (R2)…………………………

4.3.1.2 The student s t –test .51

4.3.1.3 F –Statistics……………………………………………..53

4.3.2 Econometric criteria (second order test)…………………54

4.3.2.1 Test for Autocorrelation…………………………………..54

4.3.2.2 Normality Test for Residual………………………………………………. 55

4.3.2.4 Test for multicollinearity…………………………………57

4.4 Policy implications……………………………………………58

CHAPTER FIVE

5.0 Summary of the findings, Recommendations and conclusion

5.1 Introduction………………………………………………….60

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