ABSTRACT

The study empirically investigated the role of financial development in insurance penetration in Nigeria for the period 2000 to 2023. The specific objective were to ascertain the impact of Four financial development variables such as credit to private sector (CPS), money supply to GDP (M2/GDP), market capitalization (MCAP) and exchange rate (EXRT) on insurance penetration in Nigeria. The fully modified least square (FMOS) method was employed in the analysis of data, and the results obtained revealed that credit to private sector (CPS) has significant negative relationship with insurance penetration; exchange rate (EXRT) has a strong positive impact on insurance penetration; while money supply to GDP (M2/GDP) and market capitalization (MCAP) (as measures of financial development) do not have significant impact on insurance penetration in Nigeria. The study therefore conclude that, in the determination of insurance penetration in Nigeria, financial development variable (credit to private sector (CPS)) and exchange rate (EXRT) are relevant factors that must not be ignored by management and policy makers in Nigeria. The study recommends among others that, since financial development variable of credit to private sector (CPS) has shown to be capable of reducing insurance penetration in Nigeria, policy makers should formulate urgent measure to strengthen current amount of credit granted to the insurance sector to improve their overall services and more specifically, the level of penetration.  Doing this will enable insurance managers improve current enlightenments campaign programs to deliberately create more awareness of insurance products and services to the Nigerian markets, and by so doing more persons will definitely embrace the idea of taking insurance policy, thereby improving the overall penetration rate.