By Joe Adiorho and John Okeke
FOR quite some time now, the search for alternative sources of revenues to boost the country's economy has intensified as the nation experiences dwindling income from crude oil sales, consequent upon the decline in its price in international market. A great number of strategies are being articulated by the Federal Government including austerity measures and cut down in government expenditures to cushion the adverse effect of the dwindling oil revenue. It is exploring other non-oil area to shore up the flagging economy that has adversely affected the capital expenditure segment of the 2015 appropriation estimates
One vital area it is focusing its attention on so as to harness its potential is the insurance sector. In other climes, insurance serves as the major force in the nation's economy. Unlike Nigeria where banks establish insurance companies, the insurance companies actually own banks and other big conglomerates including oil companies in places like the United States of America (USA) and the United Kingdom (UK). There is a strong belief that if properly managed and harnessed, it will be the number one mover of the economy.
An investigation has revealed that the Nigeria's insurance sector ranks about 65th in the world and sixth amongst the leading eight insurance markets in Africa - South Africa, Egypt, Morocco, Tunisia, Kenya, Nigeria, Algeria and Mauritius - and contributes about 0.7 per cent to the Gross Domestic Product (GDP) of the economy. Insurance density in Nigeria (premium per capita) is approximately N1, 200 per person, compared to South Africa's N102, 000 and Kenya's N3, 120.
With a population of 168 million in Nigeria, only about five to 10 per cent of those who should be insured are covered by any form of insurance, compared to the situation in most developing and developed countries where up to 90 or 95 per cent of the population are insured in one form or another.
Although, the insurance sector has a lot to contribute in terms of productivity and value addition, the nation's Minister of Finance, Dr. Ngozi Okonjo Iweala said its contribution in Nigeria has been dismal, pointing out that it has the potentials of attracting as much as N5 trillion and creating more than 300,000 direct jobs in less than 10 years from the current poor financial base of N300 billion and 30,000 jobs in the sector.
Unfolding the vision for the sector, Iweala said: "Let me lay out the vision for this industry and I will challenge the breakout groups to take this vision and start thinking about the operational details. The first part of our vision would be to grow our gross written premiums (GWP) of N300 billion today, to N1 trillion in the next three years, and to N5 trillion within the next decade. So we should be attaining gross premiums of about $30 billion in a decade from today. Let us focus on that prize ahead and work towards that goal."
She explained that, "the second part of the vision would be to deliver jobs in this industry. The insurance sector is a powerful engine for job creation in our economy. But today, there are only about 30,000 people working in the Nigerian insurance industry. So the second objective of our vision would be to grow the number of direct jobs created in this industry from the current 30,000 people to 100,000 people in the next three years, and to more than 300,000 people in the next decade.
She stated that part of the vision would be to widen access by growing the number of insurance policyholders in the country. "We are a country of 170 million people, but with only 3 million policyholders. Knowledge, awareness and patronage of insurance products are low across the country. So let us also work to achieve a minimum of 10 million policyholders in the next three years, and 30 million policyholders in the next decade.
"And to achieve this goal," she continued, "the industry will need to think about new distribution channels for selling insurance policies, such as, using mobile platforms, and also working with the CBN to identify appropriate bancassurance regulations. We will also need to think about how to extend micro-insurance and takaful insurance (Islamic-compliant insurance) to rural parts of the country, especially to Nigerian farmers who are exposed to various climate risks."
The Minister stated further that, "unleashing the latent energies of the insurance industry to create more jobs and boost economic development is one of our strategic responses to close the gap created by the economic challenges we are confronting at the moment"
Also commenting on the issue, the Minister of State for Finance, Bashir Yuguda, maintained that when the insurance sector is properly harnessed it would deliver many important benefits to our nation. He stressed that people have a myopic view of insurance, adding that it transcend conventional insurance coverage.
"Typically, when we mention insurance most people think about a policy they take out for their motor vehicle, or maybe, a health insurance Programme they have signed up for. But there is much more to the insurance industry than that."
He urged the insurance stakeholders to think more about introducing innovative channels in delivering insurance policies by looking at alternative channels. "A thriving insurance industry contributes to a country's economy by boosting economic growth and promoting investments," he added.
At the last National Insurance Summit organized by the Coordinating Minister of Economy (CME) and the minister of Finance, the insurance industry was charged with the responsibility of supporting government initiative on the provision of affordable housing for Nigerians. "As Finance Minister, I can tell you that a vibrant insurance industry promotes savings and investments, increases the overall financial assets in an economy and drives development of capital markets. In times of natural disasters (such as floods, hurricanes, droughts), insurance companies also help in providing financing to mitigate the social costs of catastrophes.
Mutual Benefit Plc took this call seriously and stepped into the real estate industry. On December 16, 2014, it commissioned a blocks of houses in an estate it named Mutual Alpha Court in Iponri-Costian area of Suru Lere, Lagos in what it described as its contribution to shore off the flagging financial resources of the nation occasioned by the slump in oil prices in the international market and provide decent accommodation to teeming Nigerians in the metropolis.
The estate whose construction commenced three years age is made up of four bedroom apartments on two floors with an additional two-bedroom apartment on the ground floor as service quarters. The entire estate has 18 blocks of 54 units and two blocks of two units
The Group Managing Director (GMD) of the company, Dr, Akin Ogunbiyi, told the gathering during the brief ceremony that the company's foray into housing development was to compliment government initiative at providing affordable homes to Nigerians. He reinstated that housing needs in the country have been put at 17 million, and recent efforts by government at all levels and private sector initiative had falling short of what was required
He pointed out that, "a recent study by the department of building, faculty of environmental design, Ahmadu Bello University, Zaria, revealed that some of the houses being provided, currently, do not meet the minimum quality and this has profound influence on the health, efficiency, social behavior, satisfaction and general welfare of the owners. So it became imperative to heed the clarion call on the provision of good affordable houses for Nigerians by the government."
Professor Pat Utomi, one of the subscribers to the house in the Mutual Alpha Court, was very excited stating that the Nigerian insurance sector was set for a leap into a new height. He explained that in other climes, especially, the US, the insurance companies engage in mortgage and real estate development because of the pool of money they have. "To see the swampy area transformed into this beautiful estate is a great tribute to those involved and sign of greater things that Mutual Benefit Assurance PLC will yet do."
The Lagos State Commissioner for Housing, Mr. Bosun Jeje, on his part, said that the initiative would enrich the beneficiaries and that it was in line with what the state government had been clamouring, which would serve as the catalyst of development in the real estate sector.
"It is the conviction of the state government under the leadership of Governor Raji Fashola that the provision of houses should not be seen as the sole responsibility of the Government. Our involvement in the construction of houses or housing units is to help bridge the deficit gap, and most importantly to inspire investors to the realisation that real estate sector is viable and lucrative to invest in. Our target is to have private sector drive the real estate of our economy while we provide the enabling environment for the sector to attract investments and grow in leaps and bounds.
The Commissioner for Insurance, National Insurance Commission (NAICOM), Mr. Fola Daniel, thinks that the major challenge confronting the growth of the sector had been how to get sufficient number of potential customers to buy into insurance.
According to him, the nation needed sound and safe insurance companies that would address major challenges such as financial protection, employment and relatively low level of foreign investment. "The insurance sector is a critical part of any nation's economy and has the potential of galvanizing the optimal performance of other sectors. The insurance mechanisms reduce the capital needed to operate, increase investments, foster entrepreneurship by reducing uncertainty and expand available risk management options," he said.
A leader in the insurance sector, Prof. Joe Irukwu, the Founding President of the Professional Reinsurers Association of Nigeria, said that, "modern insurance and the economy are so closely interwoven and so dependent on each other that neither can function efficiently without the other. They are, in effect, inseparable. Just as no modern economy can survive and grow without insurance, no insurance industry anywhere in the modern world can thrive under a weak and badly managed economic environment."
According to him, although the Nigerian insurance industry was relatively young compared to its counterpart in Europe and America, it had nevertheless played a very useful role over the years in relation to its traditional functions of risk bearing.
He added that, "the increasing involvement of the banks in the insurance business and the movement towards the harmonisation of the concept of a united, strong and viable financial services industry, should be constructively exploited for the collective and mutual benefit of the insurance sector. To remain relevant, the industry should be a lot more creative and innovative by introducing policies and programmes that respond to the current needs of the insuring public."
There appears to be an awakening and every segment of the nation's economy appears to be waking up to take a front seat in the quest to sustain the economy which had taken a knock as a result of the jolt caused by the dip in oil prices as Okonjo-Iweala calls out on Nigerians to see the country as a non-oil producing nation. If the momentum is sustained, Nigeria will be heading for a comfortable existence with or without oil.
Source: The Guardian
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