Examination of the impact of government economic fiscal policy on the performance of insurance business in Nigeria

ABSTRACT

The study is on “Examination of the impact of government economic fiscal policy on the performance of insurance business in Nigeria.  Four research questions were formulated to guide the study. The study adopted the survey research design. The population of the study includes all staff or employee working in the selected insurance companies. In this regard a total number of 42 people shall be used, 21 persons from the IGI Company and 21 persons from Niger insurance plc. Sample size was 38 and Taro Yamanne (1969) statistical formula was used to determine the sample but only 30 were returned. Sources of data for this research include the primary and secondary sources. The primary are information gotten from the questionnaire while the secondary sources are information gathered from textbooks, journals, and internet materials, articles related to the research topic, magazines, and newspapers. Data collected from the respondent was presented in a frequency table that shall be analyzed and interpreted using simple percentages. The hypothesis of this study were tested using analysis of variance statistical techniques (ANOVA) as 5% significant level. The findings show that government tax revenue has a significant impact on the insurance premium in Nigeria, while government investment policy has no significant effect on the insurance policy. Thus, government economic fiscal policies have a significant impact on the performance of insurance business in Nigeria. The study therefore recommended among others that, Government should review some of its economic policies that has not be favorable to the financial institutions in Nigeria. Government should as a matter of urgency fund the insurance business in order to make it competitive with their foreign counterpart. There is need to enlighten the masses on the benefit of life insurance and the activities of the insurance business in Nigeria. Government should provide a good economic atmosphere under foreign investors can come to invest and boost the activities of the insurance business.

CHAPTER ONE

    1:0 INTRODUCTION

    1:1   BACKGROUND OF THE STUDY

The use of fiscal policy is very paramount in every society, most especially in the less developed countries (LDCs) as a major tool for stabilization and for development to be sporadic. Fiscal policy as in many test and literatures could mean the government’s actions affecting its receipts, its surplus or deficit. The government may offset undesirable variations in private consumption and investment by anti-cyclical variations of public expenditure and tax revenue. Simply put, when the government uses government revenue and expenditure policies to regulate and stabilize the economy toward development, the action is fiscal policy. It does serve as an economy’s “shock Absorber” in specific areas of development.

Fiscal policy is essentially concerned with manipulating the financial operations of the government with a view of furthering certain economic policy objectives.  In other words, it consists of government decisions to vary certain fiscal aggregate such as total government spending and tax revenues as opposed to some other aspects of public finance which are primarily concerned with the effect of specific government expenditures and taxes (stein 1968). Fiscal policy is usually measure in terms of government expenditure, tax, revenue, government investment, budgeting and debts.

Fiscal policy fosters economic growth and development through a number of different channels. These include the macroeconomic (influence on budget deficit on growth) as well as micro (influence on efficiency of resource use. The question is how precisely do these channels work in developing insurance business? What kind of revenue and expenditure policies should developing countries adopt to help realize these objectives? Realistically, fiscal policy is used in governing the economy towards achieving a variety of economic transformation such as economic development and growth, price stability, reduction in unemployment, external equilibrium as well as income redistribution. Fiscal policy was not generally recognized as important until the thirties which Keynesian Economics in the mid-nineteen thirties which enhanced its significance as a policy tool to overcome the economic depression of Western Europe and North America.

There has been a scarcity of local literature and studies on the operations of the impact of government economic fiscal policy on the performance of insurance business. It has been argued that “the insurance business penetration level in Nigeria is a mere 0.6 percent due to the influence of the government economic policies as it affect the lower than that of emerging markets in Africa”. As a result of this, there is need to examine the impact of government economic fiscal policy in the performance of insurance business in Nigeria.

HISTORICAL BACGROUND OF IGI AND NIGER INSURANCE

IGI commenced business in 1992 as a composite insurer to transact the business of life and general insurance (pensions and special risks). The company quickly established a reputation for exceptional competence in the delivery of customer’s services as well as product innovation. With a strong capital base, highly qualified professionals and development of modern technology for speed and efficiency, IGI has become the preferred insurer for individual and corporate clients seeking premium insurance and related financial services in 1996, Four years after it commenced operation. IGI becomes the first private insurance company in Nigeria to premium income. In 2004, IGI maintained its leadership position in the industry with a premium income excess of 4billion naira in the private insurance industry in Nigeria. IGI also have a wide and diversified investment profile which includes ownership and majority equity including in companies engaged in telecommunication services, mortgage, building, aviation, oil, and engineering services amongst others.

However, the Niger insurance plc on its own has its head office registered at no 48/50, Odulanmi street, Lagos and its was established in August, 1962 as a specialist life company under the name Yorkshire composite insurance company, for absently it operates with an asset base in excess of 21,868,307.00 naira. The company is located at Odulanmi street Lagos. The company also engaged in telecommunication services, mortgage, banking, aviation, oil and engineering services amongst others.

1.2    STATEMENT OF THE PROBLEM

In spite of the remarkable development in Nigeria insurance market, the Nigerian insurance market is free but not operating optionally. The foregoing therefore suggests that despite the numerical growth and to some extent expansion in the insurance industry in Nigeria, the insurance markets require a thorough investigation to determine the cost structure and optimal production level in which an insurance company under the event of government deregulation policy especially restructuring and recapitalization in the finance sectors of the Nigeria economy has affected most financial institutions and makes them to operate in an increasingly competitive environment. This trend has subsisted for long as government policy on privatization, commercialization and deregulation. The need to meet up with capitalization requirements of the central bank had engendered consolidation process, which in turn has brought about mergers, acquisitions and raising of more capital through, the stock market. Another sub-sector similarly affected in Nigeria is the insurance industry (CBN, 2005).

Furthermore, as a result of the government economic policy in the financial sectors, the insurance business is under-capitalized. Hence most insurance companies found it extremely difficult to retain a reasonable percentage of large risk undertaken by them.

On the basis of the above reasons, it might be important to determine the impact of government economic fiscal policies on the performance of insurance business in Nigeria.

1.3     THE OBJECTIVES OF THE STUDY

The aim of this study is to examine the impact of government economic fiscal policy on the performance of insurance business in Nigeria,

Other purpose includes, to;

• investigate how government tax revenue affects insurance premium in Nigeria
• To assess how government investment policy affects the insurance premium in Nigeria
• Evaluate the impact of government budgeting on the function of insurance premium in Nigeria
• Determine the impact of government expenditure and debts policies on insurance premium in Nigeria

1.4    RESEARCH  QUESTIONS

This study seeks to answer the following questions

• How does government tax revenue affects the insurance premium in Nigeria
• How does government investment policy affects the insurance premium in Nigeria premium in Nigeria

(iii) What is the impact of government budgeting on the function of insurance premium in Nigeria?

(iv) Does government expenditure and debts policies have an impact on insurance premium in Nigeria.

1.5     RESEARCH   HYPOTHESIS

Hypothesis I

H₀: Government tax revenue has no significant impact on the insurance premium in Nigeria

H₁: Government tax revenue has a significant impact on the        insurance business in Nigeria

Hypothesis   II

H₀: Government investment policy has no significant effect on the insurance premium in Nigeria

H₁: Government investment policy has a significant effect on the insurance premium in Nigeria

1.6     SCOPE OF THE STUDY

This study covers the scope of government economic fiscal policy on the performance of insurance business in Nigeria, particularly Niger insurance and IGI insurance companies. The study researched on the impact of government expenditure, tax revenue, investment, Budgeting debts policies on the insurance premium precisely.

This study sourced it data primarily by using questioners on the staffs of Niger insurance and IGI insurance companies.

1.7       SIGNIFICANCE OF THE STUDY

This research work is relevant to various group of people, particularly the government, the general public sector and private sectors on the performance of insurance business in Nigeria and also enlighten them on the various challenges facing the insurance business in Nigeria.

However, acknowledge the fact that this study is not the first of its kind using Nigerian data; hence, it shall go a little further than earlier works to correctly capture all known compositions of the government economic policies as it affect the insurance business in Nigeria. This will enable the economic policy marketers to promote economic growth without resources to huge deficit finance as it affect the insurance business.

1.8       LIMITATIONS OF THE STUDY

The difficulties/limitations encountered during the study of this research are stated below:

1. The highly bureaucratic process on in the Nigerian insurance company to actually collect the relevant information as a matter of urgency as need form the information have been
2. Time constraint was a big limitation factor encountered during this project research work

• Collection of data was not an easy task as it was not easy to convince staff of Niger insurance company and IGI insurance company to give out information relating to the organization because of the Nigeria attitude towards dissemination of information.

1.9        DEFINITION OF TERMS

1. Economic Development: The process whereby an economy real national income increases over a period of time
2. Economic Policy: These are the government policies that are made to boost the level of the economy which will lead to an increase in real per capital income and real output per capital

• Exchange Rate: The price of one currency in terms of another in the foreign exchange market

1. Fiscal Policy Financial regulations by law
2. Gross Domestic Product: It is a measure of the total flow of goods and services produced by a country over a specific period of time normally a year. It is obtained by evaluating the values of goods and services at market prices and their aggregates
3. Insurance: Is a contract whereby one person called the insurer undertakes in return for the agreed considerations, called premium to pray another person, the insured a sum of money or its equivalent, on the happening of a specified event

• Tariff: Taxes imposed on commodity imported, they may be lived on an advaloren basis i.e certain percentage of value of a good or in a specific basis or an amount per unit. There purpose maybe solely for raising revenue

Premium: It is an amount paid periodically to the insurer by the insured for covering his risk.

Pages:  69

Category: Project

Format:  Word & PDF         

Chapters: 1-5                                                               

Material contains Table of Content, Abstract, References & Appendix.