A Time-Series Analysis Of Insurance Sector Density And Environmental Quality In Nigeria
KOLAPO, Funso Tajudeen (Ph.D)
Department of Finance, Faculty of Management Sciences,Ekiti State University, Ado-Ekiti, Nigeria
https://doi.org/10.47191/jefms/v7-i8-43ABSTRACT:
Nigeria is a high-polluting country, hence, carbon emissions from diverse sources tend to affect the quality of the environment. However, a high density of insurance companies in an area can lead to better risk management practices, including incentivizing policyholders to adopt environmentally-friendly measures that reduce carbon emissions. As a result, the study uses the ARDL Bounds testing framework to look at how the density of the insurance business has affected environmental quality in Nigeria from 1990 to 2021. The ARDL technique is used to look at the relationship between the research variables across the short and long run. The study showed that insurance sector density energy and renewable energy consumption increase environmental quality in Nigeria by reducing CO2 emission. The study also demonstrated that Nigeria's expanding economy (in terms of trade and economic growth) increases CO2 emission, thus affecting the quality of the environment. As a result, Nigerian government authorities should keep supporting insurance sector reforms to improve environmental quality, and insurers should reward people and businesses that use renewable energy sources and discloses their carbon emission activities. Policymakers must develop plans to increase the usage of renewable energy sources. The impact of trade openness on CO2 emission in Nigeria must be kept to a minimum, thus policymakers must establish and continuously monitor a stringent environmental regulatory framework. Furthermore, economic growth reduces environmental quality in Nigeria, thus policies such as pollution control, waste management, resource conservation, and sustainable production practices which are geared towards strengthening and enforcing environmental regulations to mitigate the negative impacts of economic activities on the environment.
KEYWORDS:
Carbon emission; Environmental quality; Insurance density; Nigeria.
REFERENCES:
1) Acheampong, A.O., Adams, S, & Boateng, E. (2019). Do globalization and renewable energy contribute to carbon emissions mitigation in sub-Saharan Africa? Science of Total Environment, 677, 436–446. https://doi.org/10.1016/j.scitotenv.2019.04.353
2) Alola, A. A., Bekun, F. V., & Sarkodie, S. A. (2019). Dynamic impact of trade policy, economic growth, fertility rate, renewable and non-renewable energy consumption on ecological footprint in Europe. Science of the Total Environment, 685, 702-709.
3) Altarhouni, A., Danju, D., &Samour, A. (2021). Insurance market development, energy consumption, and turkey’s CO2 emissions. New perspectives from a bootstrap ARDL test. Energies, 14(23), 7830.https://doi.org/10.3390/en14237830
4) Anees S et al (2019) Dynamic linkages between globalization, financial development and carbon emissions: evidence from Asia Pacific Economic Cooperation countries. Journal of Cleaner Production, 228, 533–543. https://doi.org/10.1016/j.jclepro.2019.04.210
5) Apergis, N., &Poufinas, T. (2020). The role of insurance growth in economic growth: Fresh evidence from a panel of OECD countries. The North American Journal of Economics and Finance, 53, 101217.https://doi.org/10.1016/j.najef.2020.101217
6) Appiah-Otoo, I., & Acheampong, A. O. (2021). Does insurance sector development improve environmental quality? Evidence from BRICS. Environmental Science and Pollution Research, 28(23), 29432–29444. https://doi.org/10.1007/s11356-021-12760-w
7) Balcilar, M., Gupta, R., Lee, C. C., &Olasehinde-Williams, G. (2018). The synergistic effect of insurance and banking sector activities on economic growth in Africa. Economic Systems, 42(4), 637-648.https://doi.org/10.1016/j.ecosys.2018.08.002
8) Balcilar, M., Ozdemir, Z. A., Tunçsiper, B., Ozdemir, H. & Shahbaz, M. (2020). On the nexus among carbon dioxide emissions, energy consumption and economic growth in G-7 countries: New insights from the historical decomposition approach. Environ. Dev. Sustain. 22(8), 8097–8134.
9) Cummins, J. D., & Rubio-Misas, M. (2021). Country factor behavior for integration improvement of European life insurance markets. Economic Analysis and Policy, 72, 186-202.
10) Li, X., Ozturk, I., Ullah, S., Andlib, Z., & Hafeez, M. (2022). Can top-pollutant economies shift some burden through insurance sector development for sustainable development?. Economic Analysis and Policy, 74, 326-336.
11) Lv, Z., & Li, S. S. (2021) How financial development affects CO2 emissions: A spatial econometric analysis. Journal of Environmental Management, 277, 111397. https://doi.org/10.1016/j.jenvman.2020.111397
12) Nathaniel, S., Nwodo, O., Sharma, G., & Shah, M. (2020). Renewable energy, urbanization, and ecological footprint linkage in CIVETS. Environmental Science and Pollution Research, 27, 19616-19629.
13) Pata, U.K., Samour, A. (2023). Assessing the role of the insurance market and renewable energy in the load capacity factor of OECD countries. Environ Sci Pollut Res 30, 48604–48616 (2023). https://doi.org/10.1007/s11356-023-25747-6
14) Peleckienė, V., Peleckis, K., Dudzevičiūtė, G., & K Peleckis, K. (2019). The relationship between insurance and economic growth: evidence from the European Union countries. Economic research-Ekonomskaistraživanja, 32(1), 1138-1151
15) Pesaran, M. H., & Shin, Y. (1999). An autoregressive distributed lag modelling approach to cointegration analysis. Chapter 11 in Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, S Strom (ed.). Cambridge University Press: Cambridge.
16) Pesaran, M.H., Shin, Y., & Smith, R.J. (2001). Bounds Testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326.
17) Rizwanullah, Nasrullah, M. & Liang, L. (2022). On the asymmetric effects of insurance sector development on environmental quality: challenges and policy options for BRICS economies. Environment Science and Pollution Research, 29, 10802–10811.
18) Samour, A., Onwe, J. C., Inuwa, N., & Imran, M. (2022). Insurance market development, renewable energy, and environmental quality in the UAE: Novel findings from a bootstrap ARDL test. Energy & Environment, https://doi.org/10.1177/0958305X221122
19) Senol, Z., Zeren, F., &Canakci, M. (2020). The relationship between insurance and economic growth. Montenegrin Journal of Economics, 16(4), 145-155.
20) Shin-Huei Wang, C., & Hafner, C. M. (2018). A simple solution of the spurious regression problem. Studies in Nonlinear Dynamics & Econometrics, 22(3), 23-28.
21) Ul Din, S. M., Abu-Bakar, A., &Regupathi, A. (2017). Does insurance promote economic growth: A comparative study of developed and emerging/developing economies. Cogent Economics & Finance, 5(1), 1390029.
22) Wang, R., Mirza, N., Vasbieva, D. G., Abbas, Q., &Xiong, D. (2020). The nexus of carbon emissions, financial development, renewable energy consumption, and technological innovation: what should be the priorities in light of COP 21 Agreements? Journal of Environmental Management, 271, 111027.
23) Zaidi, S.A.H., Zafar, M.W., Shahbaz, M., &Hou, F. (2019) Dynamic linkages between globalization, financial development and carbon emissions: Evidence from Asia Pacific Economic Cooperation countries. Journal of Cleaner Production, 228, 533–543. https://doi.org/10.1016/j.jclepro.2019.04.210
