INSURANCE INVESTMENT INTERMEDIATION AND CAPITAL MARKET DYNAMICS IN NIGERIA.SHORT AND LONG RUN ESTIMATES (1996 - 2022)

Abstract

Insurance companies through premiums collected from the policyholders generate or create a pool of fund that is difficult to get from other sector of the economy. This pool of fund are not just to be kept idle in the account of or purse of insurance companies, they are to invest it in order to benefit the economy, make profit, return to their owners in form of dividend and also pay profit to their with profit policyholders. One of the areas that Nigerian insurance companies are allowed to invest is the Nigerian Capital Market. The investment of insurance industry in Nigeria capital market should increase the Total Market Capitalization (TMC) of the capital market. But because of corruption, low market penetration of Nigerian insurance market by the industry, low literacy level, ignorance of the people on the benefits of insurance and bad image of insurance industry in Nigeria have led to low premium income of the country’s insurance industry. Low-premium-income of insurance companies reduces the investable fund of Nigerian insurance industry and also reduces the effect of the industry’s investment in Nigerian capital market. That is why this study this study is set to measure the effect of insurance investment in Nigerian capital market. This study sought to examine the effect of Insurance investments in government securities on Total Market Capitalization (TMC), evaluate the effect of insurance investment in stock and bond on Total Market Capitalization (TMC). determine the effect of insurance investment in mortgage and real estate on Total Market Capitalization (TMC). The study used ordinary least square method. Result reveal that Result reveals that insurance investment in government securities had a positive but non significant effect on capital market, insurance investment in stock and bonds had a positive but non significant effect on capital market, insurance investment in real estate and mortgage had a positive but non significant effect on capital market. The explained variation is very high and good for interpretation of any form of econometric result. There is evidence of long run relation because the error correction term was stationary but there is no evidence that the long runs converged but diverge to long run equilibrium