ABSTRACT
The purpose of this research is to examine the impact and benefits of the capital market in realizing the contribution of the insurance business to the economy. Despite the low number of insurance businesses listed on the stock exchange, after the recent capitalization, there are bright hopes for improvement. The challenges that arose during the research would be solved by putting the offered solution into action. Finally, it was determined that the capital market contributes to the expansion of the Nigerian insurance business.
CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
A expanding economic sector is required for every country to be economically sound. Nigeria and other third-world countries want to have a stable economic growth rate because it will help them build their economies. Economic development entails an increase in per capita real gross national product (G.N.P.) and population welfare throughout time.
Certain concerns that operate as restrictions need be addressed in order to achieve economic progress. Technological advancement, human resource development, poor productivity, capital formation, price stability, and other concerns are among them. Iniodu et al., 1996. As Nwankwo (1991) points out, “capital formation, as a function of an effective financial system, is extremely important.” Capital formation entails the mobilization and channeling of surplus resources.
However, there is growing worry regarding the Nigerian capital market’s efficiency, as well as the role of the insurance sector. It is “efficient in the sense that the capital market has boosted the nation’s output and equitable distribution of the output,” according to Ajayi (1984).
But, according to Williams (1988), the capital market is “inefficient in pooling funds for investment,” and it has aided in widening the gap between the rich and the poor by allowing only a few elites to participate.
The goal of this study is to figure out how this market affects the growth of insurance businesses in Nigeria. It seeks to clarify the role of insurance companies as significant actors in the capital market, as well as how they interact with one another. We will examine the capital market’s impact on the rise of insurance in Nigeria to have a better understanding of the subject. We want to believe that the insurance company is a member of the capital market, whose function includes, among other things, channeling long-term funds from the surplus to the deficit for investment. However, after William (1988) discovered that the capital market is inefficient, we believe that the insurance company is inefficient in pooling funds for investment. He further stated that such money are only available to a small number of elites, resulting in a wealth disparity between the rich and the poor. The capital market’s mission statement is “to promote the Nigeria capital market in order to react to the nation’s socio-economic development needs.” The capital market’s goal is to attract long-term cash for investment. The capital market serves a variety of purposes. The capital market is an alternative to bank deposits, real estate investment, and consumer loan financing in that it provides an extra avenue for engaging and mobilizing domestic savings for productive investment. It also gives depositors more protection against inflation, currency depreciation, and other risks. Another important purpose of the Nigerian capital market is to improve the efficiency of management changes when compared to public sector businesses’ administrative or prospective mechanisms.
STATEMENT OF PROBLEM
Examining the profit before taxes and increase in the profit after taxation of the five firms listed on the stock exchange, prestige assurance, Nigeria insurance, and Allco insurance. A dividend payout of NGN 55,440, 625 was also proposed, while Allco recommended NGN 70 million to shareholders. This was made feasible by the company’s recapitalization plan, which resulted in the allocation of right issues to all three insurance firms in 2003.
Crusade and unic insurance, on the other hand, saw a minor reduction in 2002 and 2001, despite the impact of the capital market. This could be due to the widespread impact of a variable, despite the fact that the main variable is well-known.
OBJECTIVES OF THE STUDY
The following are the goals of this study:
I Examine the role of the capital market in the growth of the insurance industry.
ii) Evaluate the influence of the Nigerian capital market on the insurance industry’s expansion in Nigeria.
iii) Identify the challenge that insurance businesses face as beneficiaries of the Nigeria capital market’s services.
iv) Make proposals for effective capital market management in Nigeria.
SCOPE AND LIMITATION OF THE STUDY
The researcher was confronted with various limitations when doing this research. For example:
1) Time constraint: The time allotted for this investigation is restricted, and it is insufficient for a wide range of items to be traveled together.
SIGNIFICANCE OF THE STUDY
At a time when the Nigerian government is stepping up efforts to enhance the country’s economy, the importance of researching the factors that contributed to Nigeria’s economic success cannot be overstated. This research will help our understanding of economic development through the engagement of insurance sub-sectors in the capital market.
As a result, this research is considered relevant to:
I The government, which is in charge of policy formulation.
ii) The business community for the aim of capital formation and investment.
iii) The work’s outcome will be used as research reference resources.
iv) The researcher’s knowledge of the capital market and the insurance sector will be enhanced as a result of this research.
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