DO INSURANCE MARKET ACTIVITIES PROMOTE ECONOMIC GROWTH IN NIGERIA? EVIDENCE FROM VECTOR ERROR CORRECTION APPROACH

Abstract

This study examined the dynamic relationships between insurance market activities, and economic growth in Nigeria using the Johansen approach to cointegration analysis, Vector Error Correction Model (VECM), and Granger Causality test on yearly data over the period 1985 to 2017. The results show that total premium (life and non-life) to nominal GDP exerts positive and significant relationship with real GDP in the long run. Insurance Density exerts a negative and significant relationship on real GDP. In the short run, the result of Granger causality as indicates that there is a weak unidirectional causality running from, insurance density to real GDP. The study established a weak relationship between insurance development and growth in Nigeria. The study recommends the need to establish financial institutions that would strengthen and resolve the institutional and structural problems in the economy and create structures that would sustain other causal factors that mediates growth and financial intermediation (insurance side) where appropriate.