State intervention and control of insurance business in Nigeria

In reviewing the efforts of the :~igerian Government to control the insurance industry in Nigeria ,.,rith a view to improving the tarnished image of the industry which was a prominent feature of the late 1960 l s and the early 1970 ' s this study briefly describes the evolution of the control framework, surveys the types of direct control measures and attempts an examination of the control mechanisms. In the main, these control mechanisms are the supervision of commercial insurance to ensure financial stability and good management, legislation requiring equity shareholding in foreign owned subsidiaries, direct government participation in insurance business, the making of some types of insurance compulsory and a number of miscellaneous measures. The main contention of the study is that rather than promoting the public image of the industry, government policy in a number of areas is detrimental to competition and efficiency with serious deleterious effect on the optimality of resource allocation in the Nigerian economy. Given the importance of the insurance industry in any economy the management of pure risk, the transfer and pooling of risk, its role in the financial intermediation process, the provision of funds for investment opportunities, etc, the study focuses on the urgent need to understand its industrial dynamics and formulate appropriate competition or regulatory policies for it. The study is important, at least from the viewpoint of policy implications particularly as it relates to the efficiency of the Nigerian insurance industry, the aim being to provide a set of detailed estimates to show the relative importance of the various elements of market structure and their implications for the conduct and performance of firms operating in the industry. Given the limited nature of the data, some parts of the study utilise a multivariate statistical analysis while some other employ a probabilistic model