Fire Risk Transfer and the Nigerian Economy (1999-2019)
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Feb 20, 2024
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Abstract
This study was conducted to assess fire risk transfer and its impact on the Nigerian economy over the period 1999 to 2019. It was borne out of the incessant fire outbreaks in the country in recent times which has led to an increase in fire risk premiums in the Nigerian insurance industry. The specific objectives were to investigate the trend of fire risk premium and real gross domestic product (RGDP) and assess the impact of fire risk premium on RGDP in Nigeria. The ex-post facto research design was adopted and the population consisted of all insurance companies covering fire risk as of 2019. Data were sourced from Nigeria Insurance Digest, the Central Bank of Nigeria statistical bulletin and the National Bureau of Statistics covering the selected years. The dependent variable for the study was RGDP while fire risk premium, exchange rate and money supply were independent variables. The trend analysis revealed that fire risk premiums increased at a faster rate than RGDP. while the regression analysis indicated a positive significant relationship between fire risk premiums and RGDP, and negative relationships between exchange rate and RGDP, as well as between money supply and RGDP. It was recommended that fire risk transfer should be encouraged for individuals and organizations to enhance its continued contribution to economic growth.
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Keywords
firerisk transferpremiumRGDPNigeria
References
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• Adaramola, O. A. & Dada, O. (2020). Impact of inflation on economic growth: evidence from Nigeria. Investment Management and Financial Innovations, 17(2), 1-13.
• Agyekum, K., Boateng, E. B. & Opoku, D. J. (2016). Fire safety preparedness in the central business district of Kumasi, Ghana. International Conference on Applied Sciences and Technology (ICAST), 76-88.
• Akinwunmi, M. A. (2017). Nigeria’s economic growth: past, present and determinants. Journal of Economics and Development Studies, 5(2), 31-46.
• Alabi, A.S., Adegbile, M., Alabi, O., Abisuga, O., Oyewole, K. & Oshodi, O. (2017). Stakeholders role in disaster risk reduction of fire occurrences in Lagos metropolis. International Journal of Disaster Resilience in the Built Environment, 8(4), 425-440.
• Alabi, M., Adekalu, B. & Popoola, A. (2021). Market fire disaster experience in Lagos state, Nigeria: the chronicle of traders. Researches Reviews of the Department of Geography, Tourism and Hotel Management, 50(2), 104-121.
• Alao, M. K., Yahya, M. Y. & Mahmood, W. Y. (2020). Model of fire safety management for the assessment of an office building in FCT Abuja, Nigeria. International Journal of Academic Research in Business and Social Sciences, 10(8), 334-340.
• Allen, F. & Santomero, A. M. (1997). The theory of financial intermediation. Journal of Banking and Finance, 21(11-12), 1461-1485.
• Anwana, E. O. & Affia, S. E. (2018). Economic growth and development in Nigeria: which institutions infrastructure matter? Journal of Business and Economic Policy, 5(1), 65-75.
• Anyiwe, M. A. & Aigbokhaevbolo, O. (2006). Democracy and economic growth: statistical evidence from Nigeria 1960-2002. Journal of Applied Sciences, 6, 257-265.
• Bawa, S., Abdullahi, I. & Ibrahim, A. (2016). Analysis of inflation dynamics in Nigeria (1981-2015). CBN Journal of Applied Statistics, 7(1b), 255-276.
• Benston, G. J. & Smith, W. C. Jr. (1976). A transaction cost approach to the theory of financial intermediation. The Journal of Finance, 31(2), 215-231.
• Central Bank of Nigeria (CBN) (2022) Central Bank of Nigeria Statistical Bulletin. https://www.cbn.gov.ng/documents/Statbulletin.asp. [Accessed 03.01.2023]
• Chartered Insurance Institute CII (2004). Property and Pecuniary Insurance. London: CII
• Diamond, D. & Dybvig, P. (1983). Bank runs, deposit insurance and liquidity. Journal of Political Economy, 91, 401-419.
• Doan, V. D. (2020). Money supply and inflation impact on economic growth. Journal of Financial Economic Policy, 12(1), 121-136. https://doi.org/10.1108/JFEP-10-2018-0152
• Enu, P., Osei-Gyimah, F., Aboagye, E. & Attah-Obeng, P. (2014). Benefits of fire insurance and consequences of non-compliance in Ghana: a case study of Dansoman community. Journal of International Knowledge, 71-87.
• Etale, L. M. (2019). Insurance sector development and economic growth in Nigeria: an empirical analysis. International Journal of Development and Economic Sustainability, 7(4), 34-48.
• Ewubare, D. B. & Ushie, U. A. (2022). Exchange rate fluctuations and economic growth in Nigeria (1981-2020). International Journal of Development and Economic Sustainability, 10(1), 41-55.
• Fadun, O. S. (2013). Insurance, a risk transfer mechanism: an examination of the Nigerian banking industry. IOSR Journal of Business and Management, 7(4), 93-101.
• Fama, E. F. (1980). Banking in the theory of finance. Journal of Monetary Economics, 6(1), 39-57.
• Fashagba, M.O. (2018). The impact of insurance on economic growth in Nigeria. Afro Asian Journal of Social Sciences, 9(1),1-10.
• Gatawa, N. M., Abdulgafar, A. & Olarinde, M. O. (2017). Impact of money supply and inflation on economic growth in Nigeria (1973-2013). Journal of Economics and Finance, 8(3), 26-37.
• Gurley, J.G. & Shaw, E. S. (1960). Money in a Theory of Finance. London: Brookings
• Guttentag, J. M. & Lindsay, R. (1968). The uniqueness of commercial banks. Journal of Political Economy, 71, 991-1014.
• Haiss, P. & Sumegi, K. (2008). The relationship between insurance and economic growth in Europe: a theoretical and empirical analysis. Empirica, 35(4), 405-431.
• Kelly, M., Kleffner, A., Halek, M. & Nickerson, D. (2017). The role of insurance in reducing the frequency and severity of fire losses. University of Fraser Valley: Center for Public Safety and Criminal Justice Research.
• Kugler, M. & Ofoghi, R. (2005). Does insurance promote economic growth? Evidence from the UK. Journal of the American Association, 74, 427-431.
• Leland, H. & Pyle, D. (1977). Informational asymmetries, financial structure and financial intermediation. Journal of Finance, 32, 371-387.
• Macrotrends (2021). Available at https://www.macrotrends.net/countries/NGA/nigeria/gdp-per-capita
• Mayowa, A. (2020). Theory of Financial Intermediation.
• https://www.researchgate.net/publication/345762472, [Accessed 29 January 2023]
• DOI: 10.13140/RG.2.2.14727.83365
• Merton, R. C. (1995). Financial Innovation and the Management and regulation of financial institutions. Journal of Banking and Finance, 461-482.
• Momoh, O.A. & Ajiboye, L.O. (2018). Assessment of economic benefits of fire insurance on commodity markets in Nigeria. International Journal of Research and Innovation in Social Science (IJRISS), 2(5), 18-25.
• Mutenga, S. & Straikouras, S. K. (2007). The theory of catastrophe risk financing: a look at the instruments that might transform the insurance industry. The Geneva Papers on Risk and Insurance – Issues and Practice, 32, 222-245
• National Bureau of Statistics (2021). https://www.nigerianstat.gov.ng/ [Accessed 03.01.2023]
• National Insurance Commission NAICOM (2018) Insurance Market Performance 2018. Available at https://www.naicom.gov.ng › publications
• National Insurance Commission NAICOM (2019). Insurance market performance. Market Statistical Publication. Available at https://www.naicom.gov.ng/docs/publications/ Market%20Statistical%20Publication%20-%202019.pdf
• Nigeria Insurers’ Digest (1999-2019). https://www.nigeriainsurers.org/downloads [Accessed 03.01.2023]
• Nyce, C. M. (2007). Foundations of Risk Management and Insurance. USA: American Institute for Chartered Property Casualty Underwriters/Insurance.
• Okoye, N. F., Egbo, O., Okeke, O. M. & Nwankwo, E. (2017). An analysis of the relationship between insurance risk management and growth of the Nigerian economy. International Journal of Economics and Financial Modelling, 2(1), 25-36.
• Oladokun, V.O. & Ishola, F.A. (2010). A risk analysis model for fire disasters in commercial complexes in Nigeria. The Pacific Journal of Science and Technology, 11(2), 376-385.
• Oloke, O.A., Oluwunmi, K. D., Oyeyemi, C. A., Ayedun, N. J. & Peter, N. J. (2020). Fire risk exposure and preparedness of peri-urban neighbourhoods in Ibadan, Oyo State, Nigeria. 4th International Conference on Science and Sustainable Development (ICSSD 2020). IOP Publishing.
• Onyele, K. O. & Ariwa, F. A. (2019). Risk transfer and growth of Nigeria’s insurance industry: an empirical analysis. Amity Journal of Finance, 4(2), 53-69.
• Rahn, M. (2009). Wildfire Impact Analysis, Fire Impact Analysis, Spring 2009. San Diego, CA: San Diego University.
• Rubaratuka, I. A. (2013). Investigation of provisions of fire safety measures in buildings in Dar es Salaam. International Journal of Engineering and Applied Sciences, 4(4), 40-45.
• Shuaibu, M., Yusufu, M., Abdullahi, S., Shehu, K. & Adamu, M. (2021). What explains economic growth in Nigeria in the last three decades? A dynamic modelling approach. East African Scholars Multidisciplinary Bulletin, 4(7), 1-10.
• Skipper, H. (2001). Insurance in the General Agreement on Trade in Services. USA: American Enterprise Institute.
• Twum-Barima, L. M. (2014). An assessment of the awareness of fire insurance in the informal sector: a case study of Kumasi central market in Ghana. International Journal of Humanities Social Sciences and Education (IJHSSE), 1(18), 41-47.
• Ubi, P. & Udah, E.B. (2014). Corruption, institutional quality and economic performance in an emerging economy: lessons from Nigeria. British Journal of Economics, Management and Trade 4(11), 1708-1722
• Ukpong, M. S. (2019). An empirical investigation into the relationship between premiums and claims paid in the Nigerian insurance industry: a 2000-2017 analysis. International Journal of Management & Entrepreneurship Research, 1(1), 9-17.
• Ukpong, M. S. & Acha, I. A. (2017). Insurance and economic development in Nigeria: co-integration and causality analysis. Scholedge International Journal of Management and Development, 4(4), 28-39.
• Ward, D. & Zurbruegg, R. (2000). Does Insurance Promote Economic Growth? Evidence from OECD Countries, Journal of Risk and Insurance, 67(4): 489-506.
• Webb, I. P., Grace, M. F. & Skipper, H. D. (2002). The effect of banking and insurance on the growth of capital and output. Center for Risk Management and Insurance working paper. Paper 02–1. http://rmictr.gsu.edu/working.htm
• Xin, J. & Huang, C. (2013). Fire risk analysis of residential buildings based on scenario clusters and its application in fire risk management. Fire Safety Journal, 62, 72-78.
• Olajide Solomon FADUN has a Ph.D. in Risk Management, Insurance and Financial Services from Glasgow Caledonian University, Scotland, United Kingdom. He is a consultant and a researcher familiar with theoretical concepts and practical methodologies of critical action learning, management research and action research. He is a risk management, insurance and financial services specialist with several academic publications.
• Sunday A. Aduloju is a Professor in the Department of Actuarial Science and Insurance, University of Lagos. He has a Bachelor’s degree in Insurance, Masters’ degree in Business Administration and Marketing, and a Ph.D. in Business Administration. His research interests are risk management, property and casualty insurance, and marketing management. He is an Associate of the Chartered Insurance Institute (London), the Chartered Insurance Institute of Nigeria, the Nigerian Institute of Management, and a Senior Associate Member of the Risk Managers Association of Nigeria (RIMAN). He has written two books and published in several academic journals both local and international.
• Mfon S. Ukpong is a doctoral research student in risk management and insurance. She has a Bachelor’s degree in Insurance and a Master’s degree in Risk Management and Insurance. Her research interests include reinsurance, property and casualty insurance, and risk management. She is an Associate of the Chartered Insurance Institute of Nigeria and lectures at the University of Uyo. She has also published articles in various local and international academic journals.
• Adaramola, O. A. & Dada, O. (2020). Impact of inflation on economic growth: evidence from Nigeria. Investment Management and Financial Innovations, 17(2), 1-13.
• Agyekum, K., Boateng, E. B. & Opoku, D. J. (2016). Fire safety preparedness in the central business district of Kumasi, Ghana. International Conference on Applied Sciences and Technology (ICAST), 76-88.
• Akinwunmi, M. A. (2017). Nigeria’s economic growth: past, present and determinants. Journal of Economics and Development Studies, 5(2), 31-46.
• Alabi, A.S., Adegbile, M., Alabi, O., Abisuga, O., Oyewole, K. & Oshodi, O. (2017). Stakeholders role in disaster risk reduction of fire occurrences in Lagos metropolis. International Journal of Disaster Resilience in the Built Environment, 8(4), 425-440.
• Alabi, M., Adekalu, B. & Popoola, A. (2021). Market fire disaster experience in Lagos state, Nigeria: the chronicle of traders. Researches Reviews of the Department of Geography, Tourism and Hotel Management, 50(2), 104-121.
• Alao, M. K., Yahya, M. Y. & Mahmood, W. Y. (2020). Model of fire safety management for the assessment of an office building in FCT Abuja, Nigeria. International Journal of Academic Research in Business and Social Sciences, 10(8), 334-340.
• Allen, F. & Santomero, A. M. (1997). The theory of financial intermediation. Journal of Banking and Finance, 21(11-12), 1461-1485.
• Anwana, E. O. & Affia, S. E. (2018). Economic growth and development in Nigeria: which institutions infrastructure matter? Journal of Business and Economic Policy, 5(1), 65-75.
• Anyiwe, M. A. & Aigbokhaevbolo, O. (2006). Democracy and economic growth: statistical evidence from Nigeria 1960-2002. Journal of Applied Sciences, 6, 257-265.
• Bawa, S., Abdullahi, I. & Ibrahim, A. (2016). Analysis of inflation dynamics in Nigeria (1981-2015). CBN Journal of Applied Statistics, 7(1b), 255-276.
• Benston, G. J. & Smith, W. C. Jr. (1976). A transaction cost approach to the theory of financial intermediation. The Journal of Finance, 31(2), 215-231.
• Central Bank of Nigeria (CBN) (2022) Central Bank of Nigeria Statistical Bulletin. https://www.cbn.gov.ng/documents/Statbulletin.asp. [Accessed 03.01.2023]
• Chartered Insurance Institute CII (2004). Property and Pecuniary Insurance. London: CII
• Diamond, D. & Dybvig, P. (1983). Bank runs, deposit insurance and liquidity. Journal of Political Economy, 91, 401-419.
• Doan, V. D. (2020). Money supply and inflation impact on economic growth. Journal of Financial Economic Policy, 12(1), 121-136. https://doi.org/10.1108/JFEP-10-2018-0152
• Enu, P., Osei-Gyimah, F., Aboagye, E. & Attah-Obeng, P. (2014). Benefits of fire insurance and consequences of non-compliance in Ghana: a case study of Dansoman community. Journal of International Knowledge, 71-87.
• Etale, L. M. (2019). Insurance sector development and economic growth in Nigeria: an empirical analysis. International Journal of Development and Economic Sustainability, 7(4), 34-48.
• Ewubare, D. B. & Ushie, U. A. (2022). Exchange rate fluctuations and economic growth in Nigeria (1981-2020). International Journal of Development and Economic Sustainability, 10(1), 41-55.
• Fadun, O. S. (2013). Insurance, a risk transfer mechanism: an examination of the Nigerian banking industry. IOSR Journal of Business and Management, 7(4), 93-101.
• Fama, E. F. (1980). Banking in the theory of finance. Journal of Monetary Economics, 6(1), 39-57.
• Fashagba, M.O. (2018). The impact of insurance on economic growth in Nigeria. Afro Asian Journal of Social Sciences, 9(1),1-10.
• Gatawa, N. M., Abdulgafar, A. & Olarinde, M. O. (2017). Impact of money supply and inflation on economic growth in Nigeria (1973-2013). Journal of Economics and Finance, 8(3), 26-37.
• Gurley, J.G. & Shaw, E. S. (1960). Money in a Theory of Finance. London: Brookings
• Guttentag, J. M. & Lindsay, R. (1968). The uniqueness of commercial banks. Journal of Political Economy, 71, 991-1014.
• Haiss, P. & Sumegi, K. (2008). The relationship between insurance and economic growth in Europe: a theoretical and empirical analysis. Empirica, 35(4), 405-431.
• Kelly, M., Kleffner, A., Halek, M. & Nickerson, D. (2017). The role of insurance in reducing the frequency and severity of fire losses. University of Fraser Valley: Center for Public Safety and Criminal Justice Research.
• Kugler, M. & Ofoghi, R. (2005). Does insurance promote economic growth? Evidence from the UK. Journal of the American Association, 74, 427-431.
• Leland, H. & Pyle, D. (1977). Informational asymmetries, financial structure and financial intermediation. Journal of Finance, 32, 371-387.
• Macrotrends (2021). Available at https://www.macrotrends.net/countries/NGA/nigeria/gdp-per-capita
• Mayowa, A. (2020). Theory of Financial Intermediation.
• https://www.researchgate.net/publication/345762472, [Accessed 29 January 2023]
• DOI: 10.13140/RG.2.2.14727.83365
• Merton, R. C. (1995). Financial Innovation and the Management and regulation of financial institutions. Journal of Banking and Finance, 461-482.
• Momoh, O.A. & Ajiboye, L.O. (2018). Assessment of economic benefits of fire insurance on commodity markets in Nigeria. International Journal of Research and Innovation in Social Science (IJRISS), 2(5), 18-25.
• Mutenga, S. & Straikouras, S. K. (2007). The theory of catastrophe risk financing: a look at the instruments that might transform the insurance industry. The Geneva Papers on Risk and Insurance – Issues and Practice, 32, 222-245
• National Bureau of Statistics (2021). https://www.nigerianstat.gov.ng/ [Accessed 03.01.2023]
• National Insurance Commission NAICOM (2018) Insurance Market Performance 2018. Available at https://www.naicom.gov.ng › publications
• National Insurance Commission NAICOM (2019). Insurance market performance. Market Statistical Publication. Available at https://www.naicom.gov.ng/docs/publications/ Market%20Statistical%20Publication%20-%202019.pdf
• Nigeria Insurers’ Digest (1999-2019). https://www.nigeriainsurers.org/downloads [Accessed 03.01.2023]
• Nyce, C. M. (2007). Foundations of Risk Management and Insurance. USA: American Institute for Chartered Property Casualty Underwriters/Insurance.
• Okoye, N. F., Egbo, O., Okeke, O. M. & Nwankwo, E. (2017). An analysis of the relationship between insurance risk management and growth of the Nigerian economy. International Journal of Economics and Financial Modelling, 2(1), 25-36.
• Oladokun, V.O. & Ishola, F.A. (2010). A risk analysis model for fire disasters in commercial complexes in Nigeria. The Pacific Journal of Science and Technology, 11(2), 376-385.
• Oloke, O.A., Oluwunmi, K. D., Oyeyemi, C. A., Ayedun, N. J. & Peter, N. J. (2020). Fire risk exposure and preparedness of peri-urban neighbourhoods in Ibadan, Oyo State, Nigeria. 4th International Conference on Science and Sustainable Development (ICSSD 2020). IOP Publishing.
• Onyele, K. O. & Ariwa, F. A. (2019). Risk transfer and growth of Nigeria’s insurance industry: an empirical analysis. Amity Journal of Finance, 4(2), 53-69.
• Rahn, M. (2009). Wildfire Impact Analysis, Fire Impact Analysis, Spring 2009. San Diego, CA: San Diego University.
• Rubaratuka, I. A. (2013). Investigation of provisions of fire safety measures in buildings in Dar es Salaam. International Journal of Engineering and Applied Sciences, 4(4), 40-45.
• Shuaibu, M., Yusufu, M., Abdullahi, S., Shehu, K. & Adamu, M. (2021). What explains economic growth in Nigeria in the last three decades? A dynamic modelling approach. East African Scholars Multidisciplinary Bulletin, 4(7), 1-10.
• Skipper, H. (2001). Insurance in the General Agreement on Trade in Services. USA: American Enterprise Institute.
• Twum-Barima, L. M. (2014). An assessment of the awareness of fire insurance in the informal sector: a case study of Kumasi central market in Ghana. International Journal of Humanities Social Sciences and Education (IJHSSE), 1(18), 41-47.
• Ubi, P. & Udah, E.B. (2014). Corruption, institutional quality and economic performance in an emerging economy: lessons from Nigeria. British Journal of Economics, Management and Trade 4(11), 1708-1722
• Ukpong, M. S. (2019). An empirical investigation into the relationship between premiums and claims paid in the Nigerian insurance industry: a 2000-2017 analysis. International Journal of Management & Entrepreneurship Research, 1(1), 9-17.
• Ukpong, M. S. & Acha, I. A. (2017). Insurance and economic development in Nigeria: co-integration and causality analysis. Scholedge International Journal of Management and Development, 4(4), 28-39.
• Ward, D. & Zurbruegg, R. (2000). Does Insurance Promote Economic Growth? Evidence from OECD Countries, Journal of Risk and Insurance, 67(4): 489-506.
• Webb, I. P., Grace, M. F. & Skipper, H. D. (2002). The effect of banking and insurance on the growth of capital and output. Center for Risk Management and Insurance working paper. Paper 02–1. http://rmictr.gsu.edu/working.htm
• Xin, J. & Huang, C. (2013). Fire risk analysis of residential buildings based on scenario clusters and its application in fire risk management. Fire Safety Journal, 62, 72-78.
• Olajide Solomon FADUN has a Ph.D. in Risk Management, Insurance and Financial Services from Glasgow Caledonian University, Scotland, United Kingdom. He is a consultant and a researcher familiar with theoretical concepts and practical methodologies of critical action learning, management research and action research. He is a risk management, insurance and financial services specialist with several academic publications.
• Sunday A. Aduloju is a Professor in the Department of Actuarial Science and Insurance, University of Lagos. He has a Bachelor’s degree in Insurance, Masters’ degree in Business Administration and Marketing, and a Ph.D. in Business Administration. His research interests are risk management, property and casualty insurance, and marketing management. He is an Associate of the Chartered Insurance Institute (London), the Chartered Insurance Institute of Nigeria, the Nigerian Institute of Management, and a Senior Associate Member of the Risk Managers Association of Nigeria (RIMAN). He has written two books and published in several academic journals both local and international.
• Mfon S. Ukpong is a doctoral research student in risk management and insurance. She has a Bachelor’s degree in Insurance and a Master’s degree in Risk Management and Insurance. Her research interests include reinsurance, property and casualty insurance, and risk management. She is an Associate of the Chartered Insurance Institute of Nigeria and lectures at the University of Uyo. She has also published articles in various local and international academic journals.
How to Cite
Fadun, Olajide Solomon, Sunday Adekunle Aduloju, and Mfon Sampson Ukpong. 2024. “Fire Risk Transfer and the Nigerian Economy (1999-2019)”. Studies in Business and Economics 27 (1):5-21. https://doi.org/10.29117/sbe.2024.0146.
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