Insurance and Financial Performance of Selected Oil and Gas Companies in Nigeria

Abstract

This study empirically investigates the impact of insurance on oil and gas industry in Nigeria using data from seven oil firms over the period from 2013 to 2018. Return on Asset (ROA) - the dependent variable is regressed on five explanatory variables which include insurance premium, insurance benefit (indemnity), oil and gas firm revenue, oil firm size and board independence. Employing panel data econometric technique, the empirical findings show that insurance premium and insurance benefit are positively and significantly related to the Return on Asset (ROA) of oil and gas firms in Nigeria. The study also finds that Board independence (a measure of corporate governance) and size have positive and significant impact on performance (return on asset).The findings also reveal that revenue is positively related to the return on asset of oil and gas companies in Nigeria. Against the backdrop of the foregoing findings, the study recommend increased participation of oil and gas firms in insurance activities by subscribing to insurance policies and payment of premium for which the firms will be indemnified (compensated) when the need arises, all things been equal. Strong corporate governance particularly board independence is also imperative to enhancing the performance of firms in the oil and gas industry in Nigeria. These should be supported with policies to increase firm size and growth in order to enhance the performance oil and gas companies in Nigeria.