Local Content Act, boosting the insurance industry

Local Content Act, boosting the insurance industry

 

By Joy Warikke-Briggs

 

Growing the Nigerian economy can never be through a one-off government policy, but by developing a bouquet of policies whose implementation are intricately interwoven to achieve desired economic prosperity. The manifestations of the economic growth therefrom will be in the form of increased production of goods and services, higher industrial capacity utilization, direct and indirect employment generation, improved commercial and trading activities and ultimately, improved standard of living of the citizens and higher revenue to government from company and personal income taxes. And so the cycle of economic prosperity continues.

 

It is in that context that the government of President Goodluck Ebele Jonathan deserves commendation for signing into law in 2010 the Local Content Bill. The implementation of the law has begun to have impact on the economy in terms of human capacity development in all spheres of social and economic endeavor, especially oil and gas, generation of more employment opportunities and greater retention of capital within the economy that would have been spent as consultancy fees and salary for expatriates. Of particular interest is the current development in the insurance industry where underwriters and insurance brokers have shown greater capacity to insure and, to a reasonable extent, reinsure the high net-worth properties of government and its agencies and parastatals.

 

Zeroing in on the oil and gas sector, Nigeria’s economy has been the greatest beneficiary with the insurance and reinsurance of the properties and equipment of the Nigerian National Petroleum Corporation (NNPC) joint venture valued in millions of dollars. Years past, it used to be Lloyd of London that handled the account and repatriated all its gains, leaving the Nigerian economy high and dry. That is now history because the Local Content Law has effectively put paid to that. Perhaps in anticipation of a time like this, insurance underwriters and insurance brokers have shown keener interests in the oil and gas sector of the national economy and have gone all out to acquire enormous experience and expertise in oil and gas insurance. A considerable number now have the technical capacity to participate in providing effective cover for dollarized assets.

 

The account of the NNPC joint venture is the focus here. Quite unfortunately, some insurers and brokers see the account as an opportunity to earn a share of the national cake so they desperately seek to be one of the brokers to insure NNPC’s multi-million dollars assets. They fail, deliberately or ignorantly to appreciate that the NNPC is a business entity being managed in the best national interest by a crop of competent and skilled Nigerians. These skilled NNPC staff ensure due diligence in awarding contracts and in the appointment of consultants as is compelling on all governments, agencies and parastatals in the country. Transparency has been the hallmark of their operations and that has translated into improved economic prosperity for the country.

 

The due diligence which effectively shot out some brokers in the insurance of NNPC assets did not meet well with them. National interest, they felt, should be sacrificed or their selfish interest. Instead of doing a self-appraisal to determine why they failed to secure the NNPC account and brace for a better presentation the next year, they are stridently trying to discredit the NNPC management which acted in the best interest of the country. They alleged that the NNPC had violated the Local Content Law by reducing the number of brokers handling its account instead of increasing the number so as to spread the risk. They just refused to realize that effective insurance is not about the number but the capacity and competence of those employed.

 

The kernel of the Local Content Law is the promotion of the involvement of indigenous companies and manpower and the use of locally produced goods and services in all areas of the petroleum industry. The implication is that if the NNPC finds only one company qualified and competent it can appoint only that company without any sentiments or prejudice. In so doing, NNPC would not have violated the local content law so long as the company is indigenously owned. The law does not compel NNPC to appoint any number of insurance brokers to insure its assets, only just that the broker must be an indigenous entity.

 

These aggrieved brokers needed to be reminded that providing cover for the assets of NNPC is not job for the boys. Rather, it is a serious business for competent insurance brokers who show character and capacity to provide effective cover for the assets of NNPC joint venture. It gladdens the heart that they have not been able to fault the process of selecting the preferred brokers. The NNPC duly advertised in some national newspapers for interested brokers to express interest in the insurance of their properties and the advert specified all the requirements for qualification. If the requirements were inadequate, the brokers should have, in national interest, made the point rather than wait till after they were not deemed qualified to insure NNPC properties.

 

The NNPC has consultants working for it in all spheres of life – health, education, communications, food and hygiene, engineering etc based on their capacity to deliver quality service and where any of them shows inability or complacency, its services are dispensed with without any row on the pages of the newspaper. So why will some insurance brokers resort to discrediting the NNPC for employing due diligence in picking fewer brokers to insure its properties?

 

The action of these few brokers indicates that they are desperate. They probably were passengers in the last dispensation when a consortium of 34 insurance brokers handled the account, thus earned money without offering corresponding services. That is a most dishonourable way of earning a living. For sure, if they did offer quality service, the NNPC would have gladly reconsidered them first. Gone are the days when brokers who had no credible base and expertise could wish for and get reasonable accounts like that of the NNPC without justifying why they deserve to be retained as NNPC insurer. Rather than looking for ways to improve the quality of their services and how to better package their bid in future, they are dissipating energy by impinging on the credibility of NNPC under the cover of an association. They forget that the cover for NNPC assets is not an association issue but that of the competence, credibility, capacity and expertise of the company expressing interest in the insurance of the assets.  

 

The truth is that good corporate governance in Nigeria is taking a stronger foothold over and above the desire of a few to maintain the status quo. Both the Local Content Law and the Petroleum Industry Law require people of courage and character to get Nigeria flying to attain Vision 20:2020. The nation has the capacity. The insurance industry can play a significant role in the attainment of this goal. Central to the role of the insurance industry in achieving this are the insurance brokers. Without a strong insurance broking sector the insurance industry cannot go far and by implication the economy will be in danger. Therefore, brokers must be more up and doing in helping to drive the national economy positively through competent service delivery. Offering low quality service which may discredit the broking sector of the insurance industry is undesirable. Quacks and charlatans who masquerade as brokers but get plum accounts through their godfathers are a threat to the credibility of the insurance industry. Employing unethical practices or winning accounts through godfatherism must end.

 

Joy wrote in from the Delta State University