Abstract
This paper is an empirical investigation into the relationship between fund mobilization by insurance companies and gross fixed capital formation (GFCF) in Nigeria and specifically how the latter responds to stimuli emanating from the insurance companies. A five variable-predictor multivariate regression model was estimated and analyzed. The short run results reveal that four explanatory variables namely: premium from fire, accidents, motor vehicles and employee liabilities insurance policies positively and insignificantly correlate with Gross Fixed Capital Formation while the relationship between premium from marine insurance policies and GFCF is both negative and insignificant. In the long run, the fund mobilization variables by insurance companies positively and significantly impact on the growth of gross fixed capital formation. In addition, the Granger causality test provides no evidence of causality among the variables. The paper therefore recommends the formulation and implementation of policy measures that will increase insurance penetration, improve insurance fund mobilization and enlarge the insurance market in Nigeria.
Highlights
An important function of financial intermediaries such as insurance companies in an economy is the mobilization of funds across all income levels and geographical areas, adequately, timely and at the minimal cost
The results showed short and long run causality running from bank loans to Gross Domestic Product (GDP) and a bi-directional causality between real gross fixed capital formation and bank loans
This paper set out to investigate the effect of insurance fund mobilization on the growth of gross fixed capital formation in Nigeria
Summary
An important function of financial intermediaries such as insurance companies in an economy is the mobilization of funds across all income levels and geographical areas, adequately, timely and at the minimal cost. Insurance companies raise funds by selling policies and taking in savings deposits and adequately investing these deposits in various forms of insurance investment as provided for in section 25 (2) of The Insurance Act of Nigeria 2003. The convenience, risk reduction, transfer and indemnity the insurance companies offer their customers/policy holders allow insurance companies to profit from the difference or spread between the aggregate of the mobilized premium/savings and the return on the various investments on one side, and the cost of indemnity on the other side. Insurance companies are distinguished from other businesses in that both their assets and their liabilities are overwhelmingly financial in nature but the investments can and collectively translate into growth in capital formation in the economy. Given that the extent of insurance investment seem to be a function of the quantum of fund mobilized, it logically follows that, fund mobilization by insurance companies may influence capital formation in the economy
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
