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Nigeria Capital Market on the Growth of Insurance Sector

Impact of the Nigeria Capital Market on the Growth of Insurance Sector in Nigeria

 CHAPTER THREE

3.0   RESEARCH METHODOLOGY

3.1   INTRODUCTION

This chapter is designed to present the procedures and methods adopted in the conduct of this study to enables the researcher achieve the desire objectives and address properly the issues of the study. The chapter is presented under the following subheadings.

  1. a) Research design
  2. b) Sources and method of data collection
  3. c) Population and sample size
  4. d) Method of data analysis

3.2   RESEARCH DESIGN

In this research, the descripture and analytical method is adopted. This enable the researcher conduct a detail study on the impact of the Nigeria capital market on the growth of the insurance sector and draw a valid conclusion based on findings.

3.3   SOURCES AND METHOD OF DATA COLLECTION

In this study data are collected from one main source to another. The secondary source data.

The secondary source of data includes textbooks, journals, magazine, newspaper and abstract and opinion of expect in the subject this source provides the theoretical framework for the study. It was also gotten from the annual reports of five insurance companies quoted on the stock exchange.

3.4   POPULATIONS AND SAMPLE SIZE

The population of this study is all quoted insurance companies on Nigeria stock exchange (NSE). Since the research cannot cover all the quoted insurance companies the research therefore case study the following insurance companies

–       NIGER ASSURANCE PLC

–       PRESTIGE ASSURANCE PLC

–       CRUSADER INSURANCE PLC

–       UNIC INSURANCE PLC

–       ALL CO INSURANCE PLC

The above companies were selected using the researchers judgment and co-operation from the sample size of the companies. Thus, the selected companies from the sample size of the study.

3.5   METHOD OF DATA ANALYSIS

The data analysis technique employed in this study is the sample percentage method. This method is particularly used on the analysis of data in respect of research question. The calculation is done using the formula below

% = fo  x 100

ft         1

Where % = the percentage

Fo = observed number or frequencies.

Ft = total number or frequency

In this method, the higher the % percentage the more valid the conclusion will be and vice versa.

 

CHAPTER FIVE

5.0   SUMMARY, RECOMMENDATION, CONCLUSION

This study has been discussing the impact of the Nigeria capital market on growth of the insurance sector in Nigeria. An introduction of the study was presented in chapter one of the study and literature review, research methodology presented and analysed in subsequent chapters. The aim of this chapter is to summarize the work, make recommendations based on the findings of the study and draw conclusion.

5.1   SUMMARY OF THE STUDY

The insurance companies in Nigeria, like in most countries, constitute the next longest mobilizing funds for investments after the banking industry. Insurance premium income from both the insured and the assured is a variable tool for boosting activities at the money and capital markets and for the acquisition of real and financial assets. The insurance companies is a sub sector of the capital markets and the capital market is a complex of institution and mechanisms through which medium and long term funds are pooled and made available to business and government through the use of instruments already outstanding in the transaction.

The capital market plays a key role in fostering a country’s economic development, it helps in the development of the economy through the following ways. Broader ownership base of firms, protection of investor, allocation of capital etc. furthermore, the security market segments deals with financial asst and they represents promissory notes, the non-security market also consist of market for various long term loans and funds for various productive purpose. The non-securities market consists of two market which include among other informal market and the institutionalized capital funds, the majors typs of funds provided includes long term loans lease, financing, syndicated loans, etc and two types of development finance institutions exist and they include development banks and the development finance.

In the Nigeria capital market, there are problems, which impede it’s smooth operation, and they include among others Aversion to dilution of ownership, high level of ignorance. The inefficient infrastructural facilities etc. the Nigeria’s capital market is made, the up of both primary and secondary market, the stock exchange is an institution where quoted investment are brought and sold and can also be seen as a secondary market the stock exchange has been able to accomplish a more, equitable distribution of share of quoted companies. This way the Nigeria stock exchange is also helping in socio-economic integration of all areas of the country and finally, the Nigeria in insurance company have helped to boast the Nigerian economy by giving insurance protection or cover to individuals and corporate bodies against the damage or losses arising from insured and assured events, given, the affected or their family a reason to continue to exist.

5.2   RECOMMENDATION

The Nigerian capital market in which the insurance firm is a major player is daily confronted with various problem and this said problems militates against its growth and level of efficiency. To correct if not totally eliminate the problems stated above the following should be done.

a      AVOID AVERSION TO DILUTION OF OWNERSHIP

The Nigeria entrepreneurs are averse to dilution of the ownership of business, to correct this they should actually seek quotation of the companies at the stock market. Many of those companies who are large enough to meet quotation requirements should not be reluctant to do so, should take advantage of the stock exchange.

b      REDUCTION IN THE HIGH LEVEL OR IGNORANCE

The average investor should seek to be enlightened on the activities and benefits of being quoted on the stock exchange. Or this ignorance is eliminated or reduced to mini mum, will induce the “buy and hold” attitude of the investors and therefore guarantee patronage of the stock exchange. There is very limited speculation at the market which should be corrected and further improves the vibrance of the market.

c      PROVISION OF INFRASTRUCTURAL FACILITIES

Infrastructural facilities in Nigerian macro-economy should be made efficient richly developed and finally increase in quantities. These will affects the activities of the capital market and it’s efficiency positively. In developing countries computer technology and the introduction of internet should elevate capacity of those markets in capturing all present and future information on the stock and translating these into the stock price.

d      INCREASE INFINANCIAL INSTRUMENT

The number of volume of securities at the stock market is still low and should there has sed-statistics have shown that there has been a considerable increase on the stock over the last ten years. These will sustain the buy and hold attitude of investors and further will reduce the sluggish pattern of price movement at the market.

e      IMPROVEMENT IN THE POOR INVESTMENT CLIMATE

The investment climate in Nigeria is generally very poor and should be improved. This will go a long way to reduce the risk of holding domestic financial assets in the capital market and eliminate capital flight to other countries. All the above could be achieved by promoting political stability in the country and government should participated and work against the various social unrest and instable macro economic factors with the above in place.

5.3   CONCLUSION

The impact of the Nigerian capital market on the growth of the insurance company cannot be exhausted ands so our findings taking above into consideration are seen that the capital market contributes to the growth of insurance sector in Nigeria. In analyzing of the share capital, there was an increase in their percentage which occurred between 2001 – 2003 leaving only UNIC insurance PLC which has maintained it’s sales causing no increase or decrease between 2001-2003. The company has achieved more than the minimum paid up capital or #350 million required for a composition insurance company. In addition Allco insurance Plc continues to flourish, as they had recorded breaking year in 2002 as provision for 300 million right.

Issues was made increasing the company’s paid up capital to #350 million in 2003 there was also a percentage increase of 133% between 2002 and 2003 financial year. All the above shows a positive move on the part of the insurance companies and if the recommendations above are made, it will help to boost the efficiency of the capital market and in like manner promote economic development.

IMPACT OF THE NIGERIA CAPITAL MARKET ON THE GROWTH OF INSURANCE SECTOR IN NIGERIA.

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