Abstract
This paper determined the effect of the development of non-bank financial institutions on Nigeria’s economic growth. Time series data, spanning a period of forty-one years, from 1970-2010 obtained from the Central Bank of Nigeria statistical bulletin were tested for stationarity. To measure the relationship and the impact of the explanatory variables on economic growth, the paper adopted a generic regression equation. Results suggest that total trade; investments of the insurance sector in financial asset; and insurance premiums have a high, positive and direct relationship with economic growth. Overall, our findings revealed that the focal variables insurance sector investment in financial assets; and insurance sector premiums significantly contribute to the economic growth of Nigeria.
Highlights
Choosing between competing sectors of the economy, firms and investments projects is a key role of financial intermediaries
A review of the data over the last forty years reveals that insurance consumption is strongly correlated with economic output; its growth outpaces that of the economy as shown in the figure below
This suggests that total trade, insurance sector investment in financial asset and insurance premiums contributes to the growth of the Nigerian economy
Summary
Choosing between competing sectors of the economy, firms and investments projects is a key role of financial intermediaries. Without a dependable mechanism for mutualzation, assembling and relocating risk, a large portion of the economic activity would not take place The insurance market, both as financial intermediary and as benefactor of risk transfer and indemnification, may inspire economic growth by allowing dissimilar risks to be managed more efficiently, encouraging the buildup of new capital, and by assembling domestic savings into fruitful investments (Marco, 2006).
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