THE EFFECT OF LIQUIDITY RISK ON INSURANCE INVESTMENTS IN NIGERIA

Abstract

The study determined the effect of liquidity risk on insurance investments in Nigeria. Specifically, the study sought to: examine the effect of Funding liquidity risk and market liquidity risk on Insurance industry investments in Government Securities in Nigeria. An Ex-post factor research design was adopted for the study. A Secondary source of data was used in the study. The data were obtained from the Central Bank of Nigeria Statistical Bulletin of 2016 and the Nigerian Insurers Association Annual publications of various years. The data was analysed using Ordinary Least Square Regression. The result revealed that funding liquidity risk has a positive and significant effect on Nigerian insurance industry investments in Government securities with a probability of the t-statistic of 0.0327< 0.05. while market liquidity risk has a negative and significant effect on Nigerian insurance industry investments in Government securities with a probability of the t-statistic of 0.1616> 0.05. We concluded that liquidity risk has a significant positive effect on insurance investments within the Nigerian market. We recommended that Insurers should adopt diversification strategies to spread their investment portfolios across various asset classes, including equities, bonds, and alternative investments.