Insurance as Fulcrum for Nigeria’s Economic Recovery

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As Nigeria battles to exit its economic recession, insurance managers insist that ignoring the place of insurance in the country’s growth and development amounts to postponing the evil day. Ebere Nwoji reports

The fact that Nigeria’s economy had gone into recession, even before the official declaration early this year by the Minister of Finance, Mrs. Kemi Adeosun, is obviously no longer a source of worry to both the government and the economic management team.

More worrisome now is how to tackle the various challenges posed by the recession as well as how to manage the available resources, so that in no distant time, Nigeria, will wriggle out of the recession and continue to wax strong while retaining its position as the giant of Africa.

Apparently, the prevailing economic recession, is an evil wind that blows no one good as it affects the rich and poor, the ruler and the ruled.
The situation is so tense that key managers of Nigeria’s economy wished it had fizzled out for normalcy to return into the system but this has not come to be.

In their quest to see that Nigeria gets out of it, both the finance minister and the Governor of Central Bank ( CBN) Godwin Emefiele, few months back, announced that Nigeria was exiting its economic recession to the bewilderment of many Nigerians and economy experts.

To their bewilderment, because going by the existing signs such as continued loss in the value of Naira to dollar, persistent rising inflation and continued decrease in the purchasing power of the masses among others, Nigerians, assumed that both the minister and the CBN governor were merely making mockery of the situation and fooling the masses on the enormity of the consequences of the economic recession.

At the present stage that Nigeria is in the face of the recession, it appears that the country is at a cross road as contrary to the assumption that the recession will last for a while, economy observers and operators like Mazi Sam Ohuabunwa, a former helmsman of Neimeth Pharmaceutical and President of Ikeja Business Club, recently said the recession may last for a minimum of three years, if the necessary steps required to get Nigeria out of it were taken.

He advised that what the government needs to do at this time is to encourage and stimulate economic activities among the citizens and remove every form of administrative bottleneck in the way of business operators and even give tax holidays and rebate to them.
“Dismantle all the roadblocks and deliberately make it easy to do business in Nigeria.

“We should also provide incentives to the investors – domestic and foreign to attract increased investment, give tax holidays, deferred taxation, infrastructure deficit tax reliefs, Export Expansion grants, etc. Additionally let us find ways to attract more home remittances”, Ohuabunwa advised, at a recent independence lecture he delivered in Lagos.
But on its part, the government, faced by the challenge of slide in the price of oil, which is its main source of revenue, said its next source of income is to look inwards for revenue generation through tax collection from the citizens.

Looking at the whole scenario, it has become obvious that the nation’s economy is seriously facing a big challenge which both the government and the governed must work hard to overcome if Nigeria must come out of the present recession.

Added to this is need for both government and Nigerians to protect the assets they have acquired when the economy was buoyant as well as businesses they set up with bank loans when the interest rate was lower than what it is today through insurance so that in the event of any loss, they will have something to fall back on.

Obviously, the economic challenge has brought along various vices such as corruption, which President Muhammadu Buhari’s administration has been battling agains- kidnapping, terrorism, human trafficking among other vices.

As Nigeria joins other countries of the world to celebrate World Savings day, which took place at the Government Secondary School Garki, Abuja on Monday, October 31, 2016, , one had expected that all hands should be on deck in the area of economic activities as advised by Ohuabunwa and others to recover the economy and as these activities are going on, efforts should be geared towards protecting whatever wealth Nigerians acquired through insurance. The masses are also expected to imbibe savings spirit by buying insurance, which is a good means of long term savings.

But this has not happened as even government still has not changed its nonchalant attitude towards insurance of its assets. As at today, government is yet to pay premium for group life insurance of its workers for the year despite the ‘no premium no cover’ policy of the industry and there is no guarantee that none of the government employees for which the cover is meant to protect has died.

The effect is that more businesses are closing in the country because operators could no longer cope, more people have taken to armed robbery, looting of business premises even as cybercrimes and other related criminal activities against people’s businesses are becoming the order of the day. The worst is that those affected often close shops because of lack of insurance cover to replace their lost assets.

Among the existing businesses, companies are slashing salaries and sacking workers without the ability to pay them terminal benefits to continue in life even as most of the sacked workers cannot access their pension benefits because contrary to their hopes and expectations, their employers did not remit their contributions. The overall effect is that spending habit among Nigerians has fallen to the lowest, business lull in markets becomes the daily experience setting the economy in deeper doldrums.

This is so whereas in advanced country like Britain from where Nigeria drew its insurance experience, insurance, serves as a tripod on which the entire country’s economy stands as both the government and the citizens always run to their insurers in the event of various natural and other disasters that had befallen them and tend to erode their economy. The country has bounced back after such disaster due to insurance coverage.

Here in Nigeria, in the face of the recession, rather than seeking for ways of protecting the hard earned assets built when the economy was at its buoyant stage, the government is debating on how to dispose them.

But economists have advised that rather than dispose, various sectors of the economy should contribute their quota towards protecting and turning around the economy through the use of the assets.

At a recent media seminar organised by the insurance industry regulator, the National Insurance Commission(NAICOM), at Gombe Sate, issues bothering on the Role of Insurance in a Challenged Economy like Nigeria’s formed the thrust of discussions.

In his discussions at the seminar, Director Authorisation, NAICOM, Pius Agboola said that Nigeria’s economy has witnessed in the past and is still experiencing growth without development.

According to him, facially, Nigeria witnesses growth in its GDP but suffers stagnancy in its per capital income.

According to him, the state of the economy has grown from mild recession over the years to deep recession.

He said the present economic challenges, which have culminated in recession has been there over the years but became pronounced as soon as there was official declaration by government that the economy has gone into recession.

Agboola added that minimum wage of the labour force stands at 1.5 dollar per day signifying high poverty rate.

He said at this critical stage in the economy, insurance going by its nature supposed to take center stage in the minds of both corporate and individual citizens of Nigeria as the situation demands that both individual and government preserve and protect their already acquired wealth and assets.

He listed the role of insurance as reduction of wastages in the economy, facilitating infrastructural and finance sector development, promoting economic growth and development among others.

Furthermore, he said for insurance to play these roles, government, citizens must take risk to take the country from present low level to high level economically.
He said the more individuals and government think about insurance, the shorter the period of economic hardship faced by the country.

According to him, insurance can turn any economy around as other nations who have witnessed what Nigeria is experiencing now have used insurance to turn their economy around.
To enhance the role insurance plays in a challenged economy like ours, he said there must be a regime of effective and efficient claims management.

“Claims management is one of the critical factors that build public confidence in insurance. The more you prevent fraud in claims management, the more you win public confidence”, he stated.

Head Market Development of NAICOM, Sabiu Bello Abubakar said for insurance to play its expected role, the market itself has to be developed.

He said insurance market is said to be developed when it has the capacity to take big risks.
He also said since insurance is a game of large number, development of insurance market is determined by the level of acceptance of insurance and level of patronage of the industry.
He however noted that 98 percent of Nigerians are uninsured while majority of the insured got their insurance certificates from fake operators.

He attributed the under insurance problem of Nigeria to religious beliefs, poverty level and unawareness problem.

In overall, he said Nigeria has least insurance penetration of below one percent while South Africa has as high as13 percent insurance penetration.

He however said NAICOM has mapped out a good number of initiatives to tackle the underdevelopment problem of insurance in Nigeria and beckoned Nigerians to begin to seek solace from insurance industry in the face of the present economy quagmire.

Some of these initiatives include ; Market Development and Restructuring Initiative of the commission ( MDRI), draft and release of micro insurance guidelines, designing and releasing of Takaful operational guidelines. Launch of compulsory insurance of public assets and liabilities, establishment of public complaint bureau for people to lodge their complaints in case of delayed claims settlement as well as enhancement of development of new insurance products by insurance operators among others.

He said these efforts geared towards developing the market through deepening of insurance penetration in the country.

The Commissioner for insurance, Alhaji Mohammed Kari, had precisely in January this year during his courtesy visit to THISDAY Newspapers said his main area of focus for the insurance industry this year is awareness creation on insurance among Nigerians.

He said efforts in this are geared towards deepening insurance penetration in the country.
In his words,” For the Nigerian insurance industry, we feel it has now gotten another opportunity to re -awaken itself to play its rightful role in developing the economy.
Nigeria’s economic development definitely needs everybody’s hands to be on the deck. As far as the financial sector is concerned in this country, other sectors of the financial world seem to have moved ahead of insurance sector, not for any lack of effort but principally, I think the industry has not woken up to the challenges it met along the way”, he stated.

According to him, the biggest impediment to insurance in a developing economy is the issue of inability to buy insurance and in most cases, the perception of the consumers of insurance.
“But in a clime like ours, the perception is held more by non-consumers than consumers. When you find ten people complaining about insurance, you find out that only one of them has insurance policy. In Nigeria, we like to amplify complex situation”, he stated.

Kari, however, said together with the insurance operators, the regulator is building calculated plans to improve awareness on insurance and to rebrand the whole profession and the industry so that potential consumers can now appreciate what insurance can do for them and their business.

Subsequently, he said NAICOM is out to make patronage and investment in the industry attractive by sanitising the industry, exposing those who stole shareholders’ and policy holders’ money to restore public confidence in the industry, improve patronage and reposition the insurance to play its role in the growth and development of Nigeria’s economy.