Economy
Only 30% of Insurance Firms in Nigeria are Valued Above N5b
By The Nation
More than two-thirds of insurance companies are valued below the minimum capital requirement to operate in the lowest rung of the proposed new insurance capital base, making most insurers susceptible to aggressive mergers and acquisitions.
Current valuation of insurance companies obtained at the weekend by The Nation showed that some 70 percent of insurance companies are valued below the N5 billion required to operate as a composite tier- 3 insurance company under the planned minimum capital requirements. Only 15 percent of insurers meet the N15 billion requirement while 15 percent meet the N5 billion for the second-tier composite operator.
There are 27 insurance companies quoted on the Nigerian Stock Exchange (NSE).
While regulators use the book value or shareholders’ fund as a measure of regulatory compliance, investment experts agreed that market value is a major component in any corporate valuation. Market value is usually ahead of book value because of the wealth creation potential and future value accretion of the book value. A reversal poses challenges in the event of capital raising and mergers and acquisition, according to investment pundits.
Chief Operating Officer, GTI Capital, Mr Kehinde Hassan, said market valuation is one of the criteria for valuation of a company for any purpose of new share issuance or mergers and acquisitions.
According to him, corporate finance experts use market value, net asset value or book value, peer group analysis and scenario analysis to reasonably ascertain possible valuation for a company. The financial ratios tend to revolve around a range and any value significantly outside the range is usually treated as an outlier and removed in the calculation of the pricing average.
Mr Hassan said low market valuation might have strong influence on the overall valuation of a company as strategic investors may only at best offer slight premium on market value of a company. In a hard-pressed situation, large investors may demand for market-based value or offer price around the pricing range.
Managing Director, Sofunix Investment and Communications Limited, Mr Sola Oni, said low valuation is a possible trigger for aggressive mergers and acquisitions as low-capitalised companies may find it difficult to raise required capital in the event of massive capital raising exercise by many companies.
According to him, market valuation, though not absolutely the exact determination of the value of a company in all cases, is a major indicator of the health of a company and over a period of time, the true reflection of its worth.
“If a company is struggling to meet shareholders’ expectation, such a company is a target for acquisition. Strategic investors usually look for low valuations and synergies and for a company under pressure of minimum capital requirement, the market valuation may play a big role in the negotiation,” Mr Oni said.
He noted that one of the immediate expectations from the implementation of the new tier-based capital by the National Insurance Commission (NAICOM) is mergers and acquisitions, which may lead to historic consolidation of the insurance sector.
Citing the example of the Nigerian banking industry, Mr Oni said consolidation, though somewhat a bitter pill may be the much-needed tonic to boost investors and customers’ confidence in the sector, adding that capitalisation is a major requirement for global competitiveness.
“Investors’ confidence in the insurance sector is low, so there is the need for a turnaround of the sector. Consolidation may lead to such turnaround. However, the current low valuations also present good opportunities for discerning investors who can see into the future, who know that Nigeria as a growing country cannot exist without a viable insurance sector, to take positions ahead of the repositioning of the sector,” Mr Oni said.
Most of the insurance companies are trading below their 50 kobo nominal value. Investment experts agreed that boards of insurance companies may find it difficult a decision to offer shares below nominal value.
Under the new NAICOM’s tier-based minimum solvency capital policy, insurers will be classified into three tiers according to the minimum capital base and risk-bearing capacity. Tier 1 insurance companies are required to have minimum capital base of N9 billion for general insurance and N6 billion for life insurance, implying a composite capital base of N15 billion. Tier 2 companies are divided into two categories, with N4.5 billion minimum capital base for general insurance and N3 billion for life assurance. Thus a composite insurance-general and life insurance, will be required to have minimum capital base of N7.5 billion. Tier 3 companies will continue to operate on the existing minimum capital base of N3 billion for general insurance and N2 billion for life insurance, implying a composite capital base of N5 billion for a composite tier 3 insurance company.
Under the risk-based capitalisation approach, tier 1 companies will be able to undertake all risks including annuity and high-level special risks such as energy and aviation risks. Tier 2 companies will undertake retail insurance as prescribed under Tier 1, including commercial and industrial risks and group life assurance while tier 3 companies will only be able to write retail insurance only including micro insurance, motor, fire, agriculture, compulsory liability insurances, individual life, health and miscellaneous insurance.
The Nation recently reported exclusively that insurance companies have launched plans for emergency fund raising at the capital market as consolidation looms in Nigeria’s most populous quoted industry.
By Adedapo Adesanya
Market bellwethers, Central Securities Clearing System (CSCS) Plc and FrieslandCampina Wamco Nigeria Plc, lifted the NASD Over-the-Counter (OTC) Securities Exchange by 2.08 per cent on Monday, August 3.
CSCS Plc, the Nigerian securities depository company, gained N10.00 to close at N112.00 per share compared with the previous session’s N102.00 per share, and FrieslandCampina Wamco Nigeria Plc advanced by N4.71 to quote at N152.64 per unit versus last Friday’s N147.93 per unit.
As a result, the NASD Security Index (NSI) added 92.14 points to finish at 4,523.85 points compared with the preceding session’s 4,431.71 points, and the market capitalisation appreciated by N55.31 billion to N2.715 trillion from N2.659 trillion.
Business Post reports that the price of MRS Oil Plc crashed during the trading day by N12.00 to N120.00 per share from N132.00 per share, and UBN Property Plc dipped by 3 Kobo to N1.90 per unit from N1.93 per unit.
Trading data showed that the volume of securities exchanged rose by 113.1 per cent to 1.5 million units from 690,990 units, and the number of deals climbed by 19.2 per cent to 31 deals from 26 deals, while the value of securities slid by 13.1 per cent to N65.2 million from N75.0 million.
Great Nigeria Insurance (GNI) Plc remained the most traded stock by value on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units sold for N6.5 billion, and CSCS Plc with 76.8 million units traded for N5.5 billion.
GNI Plc also closed the session as the most traded stock by volume on a year-to-date basis, with 3.4 billion units worth N8.4 billion, followed by Infracredit Plc with 2.3 billion units exchanged for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.
By Adedapo Adesanya
The Nigeria Revenue Service (NRS) has introduced a 1.5 per cent stamp duty on eligible virtual asset transactions, with the tax deducted directly from the cryptocurrency purchased before it is credited to the buyer’s wallet.
According to the new guidelines issued on Monday, anyone buying Bitcoin (BTC), USDT or other cryptocurrencies in Nigeria will receive fewer digital assets due to the deduction.
This requires registered crypto exchanges and other Virtual Asset Service Providers (VASPs) to withhold the levy in the digital asset being traded and remit it to the government, marking Nigeria’s most comprehensive move yet to bring cryptocurrency transactions into the country’s tax net.
Unlike traditional taxes deducted from a customer’s bank account, the 1.5 per cent charge will be taken from the cryptocurrency itself, meaning buyers will receive less Bitcoin, USDT or other tokens than they paid for.
The tax body stated that “income tax deducted at source and stamp duty shall be remitted to the service in the originating token of the transaction.”
Besides the new stamp duty, the guidelines also clarify how income tax, Value Added Tax (VAT) and other tax obligations will apply to virtual asset activities such as trading, staking, mining and other crypto-related transactions.
To illustrate the new rule, the tax authority said a buyer who pays N1 million for one Bitcoin will receive only 0.985 BTC after 0.015 BTC is deducted as stamp duty and remitted to the government. When that Bitcoin is later sold, the next buyer will also have 1.5 per cent deducted from the cryptocurrency credited to their wallet.
The NRS said the guidelines are intended to provide clarity for taxpayers, crypto exchanges, peer-to-peer (P2P) marketplace operators, financial institutions, tax consultants and all participants in Nigeria’s virtual asset ecosystem.
According to the guidelines, the 1.5 per cent duty applies to eligible virtual asset transactions facilitated through registered exchanges and other recognised intermediaries. Where a cryptocurrency is used to complete a transaction that already attracts stamp duty under the law, the applicable duty on the underlying instrument will also be payable.
For crypto users, the implication is higher transaction costs, as eligible purchases will attract the 1.5 per cent stamp duty, while VAT on exchange service fees and income tax on taxable gains may also apply, depending on the nature of the transaction.
By Adedapo Adesanya
The Naira opened the week on a positive note, as it appreciated against the US Dollar by N3.39 or 0.25 per cent in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Monday, August 3, to N1,364.83/$1 from N1,368.22/$1 last Friday.
However, it suffered a marginal decline against the Pound Sterling in the official market during the session by 10 Kobo to close at N1,837.89/£1 compared with the preceding session’s N1,837.79/£1, and lost 6 Kobo on the Euro to sell at N1,573.93/€1, in contrast to the previous trading day’s N1,573.87/€1.
At the black market segment, the Nigerian currency traded flat against the Dollar yesterday at N1,405/$1, and at the GTBank forex counter, it was unchanged at N1,374/$1.
Interbank FX transactions increased sharply as market makers’ activities raised total Dollar volume exchanged to $137.048 million, more than 132 per cent above $58.990 million in turnover at the previous close. The surge in turnover was driven by increased deals at the NFEM window. The central bank reported that deal count at the interbank FX window rose to 138 from 67 on Friday.
As for the cryptocurrency market, major tokens advanced despite ongoing uncertainty around unresolved Coldcard wallet sweeps that have drained hundreds of Bitcoin (BTC), while traders are watching whether bitcoin can hold above $63,000 through the US session. BTC rose by 1.70 per cent to $63,765.88.
Bitcoin treasury firm Strategy disclosed Monday it sold 1,638 bitcoin for about $105 million between July 27 and Aug. 2, its third sale of 2026, per an SEC filing.
Also, an attacker has moved about 1,816 bitcoins, or roughly $114 million, from more than 5,200 addresses since July 30 in a fourth wave of sweeps targeting BTC in Coldcard-generated addresses.
Cardano (ADA) appreciated by 6.7 per cent to $0.1959, Binance Coin (BNB) gained 1.5 per cent to sell for $590.82, Solana (SOL) jumped by 1.3 per cent to $73.72, TRON (TRX) soared by 0.9 per cent to $0.3286, Dogecoin (DOGE) also grew by 0.9 per cent to $0.0703, Ripple (XRP) advanced by 0.5 per cent to $1.07, and Ethereum (ETH) rose by 0.4 per cent to $1,863.33, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 apiece.
