CHAPTER ONE

INTRODUCTION

Background of the study

The global financial crisis that rocked the economies of nations was an extremely troublesome issue. In terms of origin, the phenomena is said to be traceable to the United States of America. As far back as August 2007, the financial institutions in the United States (US) were experiencing immense difficulties raising funds (Esezobor, 2008). Financial institutions gradually became illiquid and runs, bankruptcy, take-overs, job losses and bailouts thus weakened the financial system. Lax financial regulation ensued with the hope that the market would regulate itself, an event that never took place. With the loose market regulation, available credits went to consumer lending rather that to the real sector that drives production and the economy at large. Apart from the aforementioned, the financial crisis resulted in widespread unemployment, affecting every sector of the economy. The global financial crisis had a number of features including weak macro-economic fundamentals, high inflation rates, exchange rate crisis, devaluation of currency, decline in gross domestic product and difficulties in balancing international payment on current account (Esezobor, 2008; and Sampson, 2009). To prevent the adverse impact of the global financial crisis on Nigeria business development has been seen by many scholars and practical business individuals as a critical challenge (Sampson, 2009). Whether these and other measures can be instrumental in controlling the adverse impact of the global financial crisis on the Nigerian economy is a question, which can best be answered, in an empirical sense. Although the effect of the crisis on business growth and development in Nigeria might not be as pronounced as it was in USA, Britain, France and so on, it would be futile to be askant about its possible short and long-run influences. Hence, the need to embark on a study of this nature hoping it would give rise to meaningful schemes, plans and strategies that would eventually help the economy to tide itself over the possible difficulties that might crop up. For business organizations in Nigeria in particular, the investigation would be highly rewarding in the sense that anti-growth business and economic forces would be identified and judiciously manipulated in the best interest of the business investors, stakeholders and other players.

Statement of the general problem

The global financial crisis confronting both developed and developing economies is believed to have surfaced due largely to years of audacious and dubious investment practices, which started off in USA (Sampson, 2009). The crisis has affected the economies in the developed and developing countries. In Nigeria, fears have been gripping, as it were, all business and economic actors. After months of cautious optimism, it has become clear that the initial assumptions about the possible immunity of developing economies from the raging storm were too hasty. For the business sector in particular, it would be suicidal to assume that all would be well. In the light of the foregoing, the pertinent posers are, what have the Nigerian authorities done to mitigate the likely effects of the crisis? Are relevant strategies in place to save the business units (companies and enterprises) from this crisis? How, and what precisely are the attendant impacts on both micro and macro business endeavours? These and related intriguing posers inform the basis of this investigative study under reference.

Significance of the study

This study would be of importance to the insurance companies and other relevant agencies in knowing how the financial crises have affected them. This study will equally be important to the general public, researchers and stakeholders in knowing the impact of financial crises on insurers. This study will also be important to government so that relevant policies can be made and implemented in be proactive in dealing with future financial crises.

Objectives of the study

The following are the aims and objectives in engaging in this research

• To determine the impact of the global financial crisis on selected insurers  in AkwaIbom State;
• To evaluate the effect of the global financial crisis on the net profit earnings of selected insurance companies in Uyo metropolis;
•  To find out the extent to which the global financial crisis has affected the overall efficiency of insurance companies;
• To find out what role has been performed by the Government to mitigate the influence on insurance companies;
• To proffer solutions to the impact of the global financial crisis on the insurance sector of Nigeria.

Scope of the study

This study is restricted to the impact of financial crises on insurers with AkwaIbom state serving as the case study.

Limitation of the study

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

Research Questions

• What is the impact of the global financial crisis on selected insurers inAkwaIbomState?
• What is the effect of the global financial crisis on the net profit earnings of selected insurance companies in Uyo metropolis;
•  To what extent has the global financial crisis affected the overall efficiency of insurance companies;
• What role has been performed by the Government to mitigate the influence on insurance companies?

Research Hypothesis

H0: The current global financial crisis has no significant impact on the insurance sector in Nigeria.

H1: The current global financial crisis has a significant impact on insurance sector in Nigeria.

Definition of terms

• Financial crises:A financial crisis is a disturbance to financial markets associated typically with falling asset prices and insolvency among debtors and intermediaries, which spreads through the financial system, disrupting the market’s capacity to allocate capital.
• Insurance:An arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium.

REFERENCE

Akpa, A. (2009), Impact of the Financial Meltdown on the Nigerian Economy, lead paper presented at the Conference on Global Recession and the Nigeria’s Economy Organized by National Council on Finance and Economic Development in Collaboration with Federal Ministry of Finance March 12th – 14th .

Ariyo, A. (2009), Global Financial Crisis: Implication for the Nigeria Economy, paper presented at the 3rd Conference of Presiding Officers of Nigerian Legislatures (COPON), held at Transcorp Hilton Hotel, Abuja, 21st – 22nd May 2009.