The Nigerian Insurance sector may have lost about 200 billion naira as a result of the recent global financial meltdown, thereby eroding shareholders fund and preventing the expansion of the underwriting firms, the private Guardian newspaper reported Thursday (US$1=150 naira).
The paper quoted an unidentified industry source as saying: “You may be aware also that the policy of the commission through the Nigeria insurance market development and restructuring initiative, designed to create about 250,000 new jobs, made it mandatory for an insurance company to open four branch offices in Nigeria, before National Insurance Commission (NAICOM) could grant approval to such underwriting firm to open a subsidiary off-shore.
“This, in essence, affects opening of off-shore operations and growth.”
The initial drive by underwriting firms in Nigeria to expand and exploit opportunities in the African insurance market may have been impaired by the global financial crunch.
Already, investments by the insurance companies have crashed at the Nigerian stock market.
The paper quoted a chieftain of the industry as admitting that the impact of the global financial crisis, arising from the crash in stock prices in the Nigerian Stock Exchange, eroded the gains from the recent recapitalisation exercise in the industry, a situation which has impacted seriously on shareholders’ fund.
At the yearly general meeting of one of the underwriting firms, shareholders of the company told its directors that the opening of off-shore subsidiaries in some of the African countries was not economical and should be discontinued, since their operations do not bring any gain to the company.
But, a top official of NAICOM told the newspaper that in spite of the loses, “the total branches of Nigerian insurance companies in other parts of Africa have grown from 29 to 37 to date.
“The point we are making is that this country has a population of over 140 million and there are huge market potentials yet to be exploited in the country. We have to develop this local market to drive deep insurance penetration in Nigeria.”
