Effect of Liquidity Risk on the Investment of the Nigerian Insurance Industry

This study was on the effect of liquidity risk on the investment of the Nigerian insurance industry. The specific objectives of the study were to examine the effect of liquidity risk on insurance industry investments in federal government securities; and evaluate the effect of liquidity risk on insurance industry investments in stocks and bonds. The research design applied was Ex-post facto design. Hypotheses formulated were tested using the Ordinary Least Squares statistical technique. It was found that liquidity risk did not have a positive and significant effect on insurance industry investments in federal government securities. Also, liquidity risk did have a positive and significant effect on insurance industry investments in stocks and bonds. Based on the findings it was concluded that liquidity risks affect insurance industry investment in Stocks and Bonds but not investment in federal government securities. In line with the findings of the study, it was recommended that the insurance industry should not put in more resources in federal government securities. It is not a very attractive financial instrument and tends to sell based on the performance of the government team in power. In addition, the insurance industry should mix their purchase of Stocks and Bonds with both local and foreign financial instruments. This will aid the industry to have a diversified portfolio and that can bring in foreign currency return