By Ifeanyi Onuba
The Federal Government on Tuesday ordered the National Insurance Commission to stop the issuance of new licences to investors in the insurance sector.
The Minister of State for Finance, Dr. Yerima Ngama, gave the order in Abuja during the inauguration of the new NAICOM board.
Ngama said rather than issuing new licences, any investor desiring to own an insurance company in the country should acquire some of the existing companies.
This, he noted, would enable the investors recapitalise them and start running the companies well.
He said, "We have so many insurance companies that are just on the shelf and distressed, but it is either we liquidate them or get some serious people to take them over.
"So, there is no need to issue new licences when they have several licences to take over. It is just like the banking system, if we have so many distressed banks, why should we issue a new licence to a bank, why not buy one of the distressed ones and restructure it?
"That is why the sector does not have a single distressed bank. So, the same thing with insurance, we have so many of them. Anybody who is interested in investing in them, is welcome to buy two or three of these distressed insurance companies, merge them together, recapitalise them and run the companies."
Ngama also urged NAICOM to step up its regulatory duties as the Federal Government had already initiated several reforms that would help to make the sector stronger.
As part of the reform exercise, he said from the 2014 fiscal year, no budgetary allocation would be given to the commission.
Rather, he said the Federal Government would be expecting NAICOM to make returns to the Federation Account.
The minister said that when the commission was set up, all its capital and overhead expenditures were financed by the government as there were few insurance companies in the industry.
"But today, the industry has grown and is healthy, and we believe that as from next year, NAICOM, just like the Central Bank of Nigeria and NDIC, would generate enough internal revenue to embark on its activities without any budget support from the Federation Account," he said.
The minister lamented that insurance penetration was low in the country because of the rigidity of the system.
Also speaking, the Minister of Finance, Dr. Ngozi Okonjo-Iweala, said the Federal Government was expecting the insurance industry to support the economy.
This, she said, led to the constitution of a strong board that was expected to add value to the economy.
Okonjo-Iweala said, "We expect the insurance companies to be strong enough to be able to ensure that they can handle the expanding business in the economy. Be it in the oil sector, shipping, aviation and all those other industries that usually go offshore. And for that, you need a strong regulator and a board to oversee this.
"So, we expect that the new board members will produce results, both financial and value added to the economy."
The newly appointed Chairman of the NAICOM board, Mr. Chibudum Nwuche, said the board would study the industry carefully and ensure that the insurance industry performed optimally.
Source: Punch
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