Impact of Life Insurance Penetration on Economic Growth in Nigeria

This study examined the relationship between life insurance development and economic growth in Nigeria over the period 2000–2024. Specifically, it investigated the effects of life insurance penetration, life insurance density, gross fixed capital formation (GFCF) as a measure of capital formation, and inflation rate on real gross domestic product (RGDP). A longitudinal research design was adopted, using secondary time-series data obtained from relevant publications of the Central Bank of Nigeria (CBN), National Insurance Commission (NAICOM), and National Bureau of Statistics (NBS). The Autoregressive Distributed Lag (ARDL) bounds-testing approach was employed to examine the short-run and long-run relationships among the variables. Descriptive statistics, Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests, the ARDL bounds test, long-run estimates, and the Error Correction Mechanism (ECM) were used for data analysis. The results indicate that life insurance penetration and life insurance density have positive and statistically significant effects on RGDP in the long run. However, while life insurance penetration has a positive and statistically significant short-run effect, life insurance density has a positive but statistically insignificant short-run effect. GFCF has a positive and statistically significant effect on RGDP in both the short and long run, whereas inflation has a negative and statistically significant effect in both periods. The ARDL bounds test confirms the existence of a long-run equilibrium relationship among RGDP, life insurance penetration, life insurance density, GFCF, and inflation. The ECM coefficient of −0.53 indicates that approximately 53% of short-run disequilibrium is corrected annually towards long-run equilibrium. The diagnostic and stability tests indicate that the model is statistically adequate, with no evidence of serial correlation or heteroscedasticity problems. The study concludes that life insurance development is positively associated with economic growth in Nigeria, particularly in the long run. It recommends measures to deepen life insurance penetration and density through increased insurance awareness, improved financial literacy, expansion of accessible insurance products, strengthened regulatory enforcement, enhanced financial inclusion, and policies that promote macroeconomic stability.