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Insurance Penetration and Interest Rate Nexus in Nigeria; an Autoregressive Distributed Lag Approach

Author

Listed:
  • Uruakpa Chiagoziam Gospel PhD

    (Department of Economics, Rhema University Nigeria)

  • Kenneth C Kama

    (Department of Economics, University of Nigeria)

  • Odionye Joseph C. PhD

    (Department of Economics, Abia State University, Nigeria)

  • Uzoma Kelechi P

    (Department of Economics, Rhema University Nigeria)

Abstract

This study investigated the effect of interest rate on insurance penetration in Nigeria. Interest rate is a vital monetary instrument that helps in macroeconomic stability through proper mobilization and distribution of capital. It’s adjustment affects both banking industry as well as the non – banking financial institutions such as the insurance industry. For developing countries like Nigeria with social and economic problems, the issue of risk management and insurance services as related to economic stability is relatively determined by the structural arrangement of the insurance sector and such arrangement is relative to the performance of all economic actors and the overall social environment The study used Auto Regressive Distributed Lag (ARDL) bounds test approach. Data was sourced from the central bank of Nigerian statistical bulletin for the period of 1985 to 2019. The result indicated that an increase in interest rate significantly decrease the rate of insurance penetration in both short run and long run. Other control variables used are exchange rate and inflation rate, and the result for this variables indicates that exchange rate has a significant relationship whereas inflation rate has an insignificant relationship with insurance penetration. The result of the co-integrating equation indicates that every movement into disequilibrium is corrected for within one period at a significant rate. The study therefore suggested that prior to any adjustment in the monetary policies or other economic policy, a detailed investigation should be carried out to ensure a favorable compliance of the short run and long run effect of adjusting such on the macroeconomic indices and insurance penetration.

Suggested Citation

  • Uruakpa Chiagoziam Gospel PhD & Kenneth C Kama & Odionye Joseph C. PhD & Uzoma Kelechi P, 2023. "Insurance Penetration and Interest Rate Nexus in Nigeria; an Autoregressive Distributed Lag Approach," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(10), pages 790-800, October.
    • Handle: RePEc:bcp:journl:v:7:y:2023:i:10:p:790-800
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    References listed on IDEAS

    as
    1. World Bank, 2016. "World Development Indicators 2016," World Bank Publications - Books, The World Bank Group, number 23969, April.
    2. Massomeh Hajilee & Omar M. Al Nasser, 2017. "The Impact Of Interest Rate Volatility On Stock Market Development: Evidence From Emerging Markets," Journal of Developing Areas, Tennessee State University, College of Business, vol. 51(2), pages 301-313, April-Jun.
    3. Philip Chimobi Omoke, 2012. "Insurance Market Activity and Economic Growth: Evidence from Nigeria," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 2(2), pages 34-47, April.
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