EFFECT OF EXCHANGE RATE VOLATILITY ON THE PERFOEMANCE OF INSURANCE SECTOR IN NIGERIA

ABSTRACT
The research work investigated the effect of exchange rate volatility on the
performance of insurance sector in Nigeria for the period of 32 years
which is between 1988 and 2019.Secondary data on insurance output to
gross domestic product, exchange rate and interest rate which were
gathered from Central Bank of Nigeria (CBN) Statistical Bulletin and
NAICOM Bulletin 2019.Econometric Measure (E-views) version 9.0 was
used to analyse the data. The researcher relies on Ordinary Least Square
Estimator (OLS), in evaluating the relationship and impact between the
selected variables. The analysis of the ADF and PP unit root tests showed
that none of the variables were stationary at level and at first differences;
cointegration relationship between exchange rate volatility measures and
insurance sector performance measures was confirmed; there is existence
of a long-run relationship between variables; there is no granger causality
or bi-directional relationship between the variables and vice-versa. The
study concluded that exchange rate has a positive and significant
relationship with insurance sector in Nigeria. The study therefore
recommends that there is need for a defined exchange rate regime and a
unified exchange rate within the Nigerian financial system so that the
abnormal gains from currency variations (high or low) can be addressed
which will directly and positively affect insurance sector.

Keywords: Exchange Rate. Interest Rate, Insurance Sector, Gross
Domestic Product.