Economy
Nigerian Insurance Industry Will Survive Weak Economy, Election—Agusto
By Adedapo Adesanya
A credit rating agency, Agusto & Co, has revealed that Nigeria’s insurance industry is poised to emerge stronger amid weak macroeconomic indicators and uncertainties surrounding the 2023 general elections.
This was contained in its 2023 insurance industry report, which provides a comprehensive review of the insurance landscape in Nigeria and the near-term expectation for the industry.
The report contains a review of how the Nigerian insurance industry has fared amidst the lingering macroeconomic headwinds and outlook for the Industry in an election year.
According to Agusto & Co., the Nigerian insurance industry’s estimated gross premium income (GPI) maintained its double-digit growth trend and crossed the N700 billion mark in FY 2022.
The uptick in the industry’s premium was driven by several factors, including improved economic activities and stronger regulatory support.
Furthermore, while the Industry’s performance in FY2021 was moderated by the payout of claims emanating from the violence that trailed the #EndSARS protest, such outflows were minimal in 2022, given the non-recurring nature of the crisis.
Consequently, the Nigerian insurance industry’s estimated net claims for FY2022 rose by a lower 13 per cent relative to the previous year. Notwithstanding, inflationary pressures continue to adversely impact claim settlements, underwriting costs, operating expenses and also moderate profitability indices.
Agusto & Co. also recognises that the country’s insecurity gaps, infrastructural shocks and aftermath of the#EndSARS protest have emphasised the benefits of insurance products, particularly fire and general accident policies.
One of the most notable highlights of the Industry in 2022 was the increase in third-party motor insurance policy rates by the National Insurance Commission (NAICOM), the apex regulator, on December 22, 2022. NAICOM raised the new premium for private motors to N15,000, staff buses to N20,000, commercial trucks/general cartage to N100,000, commercial tricycles to N5,000 and commercial motorcycles to N3,000. These policies previously had a basic rate of N5,000.
In addition to the new premium rates, NAICOM announced that the comprehensive motor insurance policy premium rate should not be less than 5 per cent of the sum insured after all rebates or discounts.
Although the policy has received some criticisms, Agusto & Co. believes that it would cushion the rising loss rates from the associated business line and support a boost in GPI in FY2023.
Nevertheless, Nigeria’s political environment will define the financial year 2023 for insurance operators.
The first half of 2023 would be characterised by electioneering activities, while the second half would bring a new administration and fresh ideas for fiscal and economic transformation.
The firm noted that possible election violence poses a downside risk that could adversely impact insurance operators, especially if it is a widespread occurrence across several states.
However, there will also be opportunities to secure new insurance contracts from the public sector, especially in the second half of 2023.
In the near term, Agusto & Co. expects the introduction of a risk-based capital regime to gain momentum while NAICOM continues to implement policies and directives that would boost the industry’s sustainability.
“A strong regulatory stance to claims payments which resulted in the withdrawal of the license of some insurers in 2022, though being contested in the court of law, would remain in 2023 and possibly going forward as part of NAICOM’s efforts to sanitise the industry.
“The non-conventional takaful insurance segment, which is an under-tapped area, is already witnessing significant growth as evidenced by the marked 172 per cent growth in GPI in FY2021.
“We anticipate that the segment would continue on its upward trajectory in the near term. Takaful insurers offer alternatives to conventional insurance, and their model is based on the concept of social solidarity, cooperation and mutual indemnification of losses of members,” according to a note shared with Business Post.
Agusto&Co. also believes that these alternative insurers would continue to leverage the large Muslim population in Nigeria, estimated at over 100 million, to grow the segment.
Albeit, the relatively low awareness of these alternative products remains a challenge to be surmounted.
Microinsurance is also poised for growth given the dwindling consumer purchasing power, large informal sector and relatively high poverty rate in the country.
“Overall, Agusto & Co. expects a modest performance by the Industry in FY 2023, supported by the rising yield environment. Initiatives such as the bancassurance model, which would enable insurance operators to partner with the banking industry to deepen their reach in the retail market, will also bolster the industry in our view. The rate hikes for third-party motor insurance and the bullish growth track for microinsurance, takaful insurance and some new entrants in the conventional insurance landscape are also growth drivers for the industry.
“Furthermore, the intensified marketing campaigns, awareness programmes and adoption of digital channels would continue to support penetration, albeit strong broker relationships would remain vital in bolstering performance,” the note said.
Agusto&Co. noted that the political terrain would also shift in the year 2023, and the operators’ ability to respond promptly to these changes would be a key factor for the industry’s performance in the near term.
By Adedapo Adesanya
Seplat Energy Plc will revive hundreds of Nigerian oil wells laying fallow after completing the acquisition of Mobil Producing Nigeria Unlimited (MPNU) from ExxonMobil.
The company said it aims to lift oil output to about 200,000 barrels a day, a move that will help boost Nigeria’s oil production levels, as it aims to reach 2 million barrels per day next year.
The transaction, according to Seplat, “is transformative for Seplat Energy, more than doubling production and positioning the company to drive growth and profitability, whilst contributing significantly to Nigeria’s future prosperity.”
The completion of the Seplat-ExxonMobil deal has created Nigeria’s leading independent energy company, with the enlarged company having equity in 11 blocks (onshore and shallow water Nigeria); 48 producing oil and gas fields; 5 gas processing facilities; and 3 export terminals.
Recall that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in October approved the deal as part of a series of approvals, while it blocked Shell’s asset sale of up to $2.4 billion to the Renaissance consortium.
The acquisition of the entire issued share capital of MPNU adds the following assets to the Seplat Group: 40 per cent operated interest in OML 67, 68, 70 and 104; 40 per cent operated interest in the Qua Iboe export terminal and the Yoho FSO; 51 per cent operated interest in the Bonny River Terminal (‘BRT’) NGL recovery plant; 9.6 per cent participating interest in the Aneman-Kpono field; and approximately 1,000 staff and 500 contractors will transition to the Seplat Group.
MPNU adds substantial reserves and production to Seplat Energy; 409 million barrels of oil equivalent (MMboe) 2P reserves and 670 MMboe 2P + 2C reserves and resources as at 30 June 2024 and 6M 2024 average daily production of 71.4 kboepd (thousand barrels of oil equivalent).
Business Post reports that Seplat will be part of the payment this year, and will defer some to next year,
Speaking on the transaction, the Chairman of Seplat Energy, Mr Udoma Udo Udoma commended President Bola Tinubu for supporting this transaction and appreciated the support and diligence of the various ministries and regulators for all the work to reach a successful conclusion.
“We are delighted to welcome the MPNU employees to Seplat Energy. We are excited to begin our journey in a new region of the country, and we look forward to replicating the positive impacts we have achieved within our communities in our current areas of operations.
“Seplat’s mission is to deliver value to all our stakeholders, and we treasure the good relationships we have developed with the government, regulators, communities and our staff.”
On his part, the chief executive of Seplat Energy, Mr Roger Brown, described the acquisition as a major milestone, adding, “I extend my thanks to the entire Seplat team for their hard work and perseverance to complete this transaction.
“MPNU’s employees and contractors have a strong reputation for safety and operational excellence, and I welcome them to the Seplat Energy Group.
“We have acquired a company with one of the best portfolios of assets and related infrastructure in a world-class basin, providing enormous potential for the Seplat Group. Our commitment is to invest to increase oil and gas production while reducing costs and emissions, maximising value for all our stakeholders.
“MPNU is a perfect fit with our strategy to build a sustainable business that can deliver affordable, accessible and reliable energy for Nigeria alongside attractive returns to our shareholders”.
By Adedapo Adesanya
The National Pension Commission (PenCom) is projected to close the year with over N22 trillion in pension assets impacted by challenges like inflation and monetary policies.
This is according to PenCom Director-General, Mrs Omolola Oloworaran, at a press conference in Abuja on Thursday.
She said as of October 2024, the Contributory Pension Scheme (CPS) had 10.53 million registered contributors and pension fund assets worth N21.92 trillion.
Speaking at the conference-themed Tech-driven Transformation Shaping the Pension Landscape, which showcased PenCom’s strategic commitment to innovation, she said that the numbers reflected the agency’s unwavering commitment to fund safety, prudent management, and sustainable growth.
She explained that the pension environment was impacted by the wider economic challenges facing the country, noting that the sector battled multi-year high inflation, Naira devaluation, and the lingering effects of unorthodox monetary policies by the Central Bank of Nigeria (CBN).
Business Post reports that the apex bank hiked interest rates by 875 basis points this year alone to tackle persistent inflation which peaked at 33.8 per cent as of October.
She said that these challenges eroded the real value of pension funds and impacted contributors’ purchasing power.
“To address these issues, the commission has initiated a comprehensive review of its investment regulations.
“It is focusing on diversifying pension fund investments into inflation-protected instruments, alternative assets, and foreign currency-denominated investments.
“The goal is to safeguard contributor savings and ensure resilience against future economic volatility,” she said.
She restated the commission’s commitment to expanding pension coverage, particularly through the advanced micro-pension plan designed to encourage participation from the informal sector using technology.
“This initiative will make it easier for everyday Nigerians to save for retirement, aligning with our vision of inclusive growth and financial stability for all.
“The backlog in retirement benefits for retirees of the Federal Government’s Ministries, Departments, and Agencies (MDAs) will soon be settled.
“The federal government recently disbursed N44 billion under the 2024 budget to settle approved pension rights.
“We are collaborating with the Federal Government to institutionalise a sustainable solution to ensure retirees receive their benefits promptly, eliminating delays,” Mrs Oloworaran said.
She said that PenCom’s technology-driven transformation aimed to make the CPS more accessible, reliable, and sustainable.
“From data management to seamless contributions and regulatory supervision, we are paving the way for a future where the pension industry serves all Nigerians effectively,” she said,
Mrs Oloworaran also said that the e-application portal for pension clearance certificates has replaced the manual processes and enhanced the ease of doing business in the sector.
“Since its deployment, 38,528 pension clearance certificates have been issued. This initiative ensures compliance and secures the future of Nigerians working in organisations that interact with the government,” she said.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange closed flat on Thursday, December 12 after it ended the trading session with no single price gainer or loser.
As a result, the market capitalisation remained unchanged at N1.055 trillion as the NASD Unlisted Security Index (NSI) followed the same route, remaining at 3,012.50 points like the previous trading session.
However, the activity chart witnessed changes as the volume of securities traded at the bourse went down by 92.5 per cent to 447,905 units from the 5.9 million units transacted a day earlier.
In the same vein, the value of securities bought and sold by investors declined by 86.6 per cent to N3.02 million from the N22.5 million recorded in the preceding trading day.
But the number of deals carried out during the session remained unchanged at 21 deals, according to data obtained by Business Post.
When trading activities ended for the day, Geo-Fluids Plc remained the most active stock by volume (year-to-date) with 1.7 billion units sold for N3.9 billion, Okitipupa Plc came next with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc was in third place with 297.5 million units worth N5.3 million.
Also, Aradel Holdings Plc remained the most active stock by value (year-to-date) with 108.7 million units worth N89.2 billion, followed by Okitipupa Plc with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with 297.5 million units sold for N5.3 billion.
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