The Determinants of Insurance Penetration Across Nigerian States: A Panel Data Analysis

This study empirically investigates the determinants of insurance penetration across Nigerian states using panel data analysis for the period 2013 to 2023. Nigeria's aggregate insurance penetration rate of approximately 0.3 percent of GDP is among the lowest globally, but meaningful variation exists across states that has not been rigorously explained in the academic literature. Identifying the drivers of this variation can inform targeted policy interventions to accelerate insurance market development at the subnational level. This study constructs a state-level panel dataset combining NAICOM premium income data with macroeconomic, demographic, institutional, and financial inclusion variables from the National Bureau of Statistics and the CBN. Explanatory variables include per capita income, urbanization rate, financial inclusion index, literacy rate, road density, and insurance regulatory presence. Fixed effects, random effects, and system GMM panel regression estimators are applied. Results reveal that per capita income and financial inclusion are the strongest and most robust determinants of insurance penetration across states, confirming demand-side constraints as the primary barrier. Urbanization has a significant positive effect, while proxies for insurance supply-side quality including the presence of licensed insurers show a positive but smaller effect. North West and North East states consistently underperform their income-predicted penetration levels, suggesting cultural and institutional factors constrain demand beyond economic variables. The study contributes original state-level insurance penetration estimates and recommends targeted financial inclusion and insurance awareness programs for underperforming states.

Keywords: insurance penetration, panel data, determinants, Nigerian states, financial inclusion.