Modelling the Implication of External Debts Statistics on Insurance Market Operations, Evidence from Nigeria
Ezema, Clifford Anene1, Anikwe Grace2 and Amobi Ogbodo3
1Senior lecturer in Department of Insurance and Risk Management, Faculty of Management Sciences, Enugu State University of Science and Technology, (ESUT), Enugu Email: clifford.ezema@esut.edu.ng
2Lecturer in Department of Marketing, Faculty of Management Sciences, Enugu State University of Science and Technology, (ESUT), Enugu
3Lecturers in Department of Cooperative Economics &Management, Faculty of Management Sciences, Enugu State University of Science and Technology, (ESUT), Enugu
ABSTRACT
External debt refers to borrowing obtained from non-resident lenders such as foreign commercial banks, foreign governments, and international financial institutions with repayment obligations denominated in the currency of issuance. In Nigeria, the rising stock and servicing burden of external debt has generated concern about macroeconomic instability and the downstream effects on financial sector performance, including insurance market outcomes. This study examines the implications of Nigeria’s external debt for insurance business transactions. The study pursued two objectives: (i) to assess the implication of external debt on total insurance premium generation in Nigeria, and (ii) to investigate its implication on insurance investment in Nigeria. Annual time-series data spanning 1996-2024, sourced from the Central Bank of Nigeria (CBN), were analysed. After conducting unit root diagnostics to determine the integration properties of the variables, a static Ordinary Least Squares (OLS) multiple regression specification was adopted as the preferred estimation approach, consistent with the observed levels of integration. The results indicate that external debt exerts a positive but statistically non-significant effect on total insurance premium generation in Nigeria. In contrast, external debt exhibits a negative but statistically non-significant effect on insurance investment. These findings suggest that, while rising external debt may coincide with higher premium volumes, it is also associated with weaker insurance investment performance possibly reflecting heightened macroeconomic uncertainty, exchange-rate exposure, and risk-pricing dynamics that influence insurers’ asset allocation and capital formation. The study concludes that the worsening external debt profile poses adverse macroeconomic pressures that can transmit to insurance sector operations, particularly through channels affecting investment decisions. Accordingly, the study recommends that government strengthens debt management by prioritising sustainable debt levels and efficient servicing, while implementing policies that support exchange-rate stability to reduce volatility. In addition, economic diversification especially into sectors less vulnerable to external shocks should be accelerated to reduce dependence on external conditions that can intensify debt and exchange-rate vulnerabilities. These measures would help mitigate economy-wide shocks whose spillovers shape insurance market performance and managerial decision-making.
Keywords; External debts, Total Insurance premium, Total insurance Investments, Nigeria
CITE AS: Ezema, Clifford Anene, Anikwe Grace and Amobi Ogbodo (2025). Modelling the Implication of External Debts Statistics on Insurance Market Operations, Evidence from Nigeria. NEWPORT INTERNATIONAL JOURNAL OF CURRENT RESEARCH IN HUMANITIES AND SOCIAL SCIENCES, 5(3):28-38 https://doi.org/10.59298/NIJCRHSS/2025/5.3.283800