Insurance and Industrialisation Nexus in the Gulf of Guinea: The Role of Institutional Strength

ABSTRACT Despite the prolonged use of external sources of finance, the financing gap for industrialisation in Africa, especially for countries along the Gulf of Guinea, is still enormous amidst numerous episodes of shocks to external sources of finance. This study investigates the influence of institutional strength on the relationship between insurance and industrialisation in 13 countries situated along the Gulf of Guinea. The results consistently show the negative impact of insurance activities on industrialisation across all distribution levels, particularly for countries in the upper quantile. The results from the interaction analysis show that institutional quality in the Gulf of Guinea countries is insufficient to mitigate the negative effect of insurance activities on industrialisation. All stakeholders in the government and the financial system should prioritise floating low‐risk and credible debt instruments (insurance premiums) to increase the stock of finance available to induce industrialisation within the region.