CASH FLOW MANAGEMENT AND THE PERFORMANCE OF INSURANCE FIRMS IN NIGERIA

ABSTRACT

This study empirically investigates the extent to which cash flow management has impact the performance of insurance industry in Nigeria. Annual time series data covering a period of 35 years (1986 to 2020) were analyzed using the fully modified ordinary least square (FMOL) estimates. Correlation matrix and the cointegration analysis were also employed for the preliminary tests. The results from the empirical analysis revealed that investing cash flow (ICFL) has a negative insignificant relationship with insurance firms’ performance. Financing cash flow (FCFL) and operating cash flow (OCFL) have significant positive impact on insurance industry performance in Nigeria. In conclusion, effective and efficient management of cash flow is plays significant role in the determination of insurance sector performance in Nigeria. The study recommends among others that, management are advise to always formulate appropriate investment strategy that will ensure that all cash investment on any given project yield high positive NPV at the end of the financial year. Doing this will ensure that invested funds provide the much needed positive impact on the overall performance of insurance firms in the country. Also, adequate policy thrust should be evolve by NICOM and the Central Bank of Nigeria (CBN) making it mandatory for insurance companies to maintain persistent increase in cash reserve. The level and strength of corporate governance need to be monitored by the apex bank (CBN). This will definitely go a long way to strengthen insurance firms in Nigeria thereby enhancing their overall performance.