IMPACT OF THE NIGERIA CAPITAL MARKET ON THE GROWTH OF INSURANCE SECTOR IN NIGERIA. A RESEARCH PROJECT TOPICS ON INSURANCE
The aim of this study is to analyze he impact and benefit of the capital market in the realization of the insurance industry contribute to the economy. Despite the low number of insurance companies listed in the stock exchange, there are positive prospects of improvement after the recent capitalization. The problems encountered during the research would be addressed through the implementation of the suggested solution. It was finally conclude that capital market contributes to the growth of insurance sector in Nigeria.
For any country to be economically sound, she must experience a growing economic sector. It is of interest to Nigeria and other third world countries to attain a steady economic growth rate, as this would enhance National development. Economic growth and development involves an increase overtime of per capital real gross National product (G.N.P) and the welfare of the population.
For economic growth to be achieved, a certain issues that act as constraints ought to be tacked. These issues include technological development, human resources development, low productivity, capital formation, price stability etc. (Iniodu 1996). And as Nwankwo (1991) observes, capital formation which is the function of an efficient financial system is very vital” capital formation involves the mobilization and channeling or resources form the surplus spending units (ssu) to the deficit spending unit (Osu). The Nigeria capital market is a critical part of the financial system which performs this allocative role.
The market is the long term end for financial market. It is made up of the market and institutions, which facilitate the issuance and secondary trading of long term financial instruments. Unlike the money market which function basically to provide short-term funds, the capital market provides funds to industries and government to meet their long-term requirements.
The capital market has it’s mission statement that is “promoting the Nigeria capital market to respond to the socio-economic development need of the nation”. The objective of the capital market is to mobilize long-term funds for investment. The capital market is performing various functions. The capital market provides an additional channel for engaging and mobilizing domestic savings for productive investment and represents alternative to bank deposit, real estate investment and the financing of consumption loans. It also provides deposit with better protection against inflation and currency and depreciation. Another major function of Nigeria capital market is to improve the efficiency management changes as compared with the administrative or potential mechanism of public sector corporations. The capital market facilitates the transfer of enterprises from the public sector to the private sector and encourages privatization by increasing the marketability of new issues. The capital market employs some instruments used to raise funds, these instruments are equities-ordinary shares and preference shares. Debt government bonds (federal state and local government). Industrial loans / debenture stocks and bonds.
The players in the capital market are the funds providers who are individuals, unit trusts, pension funds, insurance companies, government intermediaries are the stock broking firms, issuing housing, registers, audit firms and regulators e.g. securities and exchange Commission. The Nigeria stock exchange central bank of Nigeria and the federal ministry of finance.
However, there is a growing concern about the efficiency or otherwise of the Nigeria capital market and to the role f the insurance sector. Ajayi (1984) sees it as “efficient in the sense that, the capital market has increased the nation’s output and equitable distribution of the output.
But, Williams (1988) see that capital market as “inefficient in pooling funds for investment” he observe further that by participation of only a few elites, it has helped to widen the gap between the rich and poor.