Economy

Only 30% of Insurance Firms in Nigeria are Valued Above N5b

Published

7 years ago

24/09/2018

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.

Economy

NASD Market Falls 1.18% to Extend Losing Streak

Published

14 hours ago

14/03/2026

Adedapo Adesanya

By Adedapo Adesanya

The NASD Over-the-Counter (OTC) Securities Exchange extended its stay in the south for the fourth consecutive session after it shed 1.18 per cent on Friday, March 13.

The unlisted securities market recorded a loss despite closing without a price decliner, and ending with two price gainers led by Geo Fluids Plc, which gained 1o Kobo to sell at N3.10 per share compared with the previous day’s N3.00 per share. Industrial and General Insurance (IGI) Plc appreciated during the session by 2 Kobo to trade at 54 Kobo per unit versus Thursday’s closing price of 52 Kobo per unit.

When the market closed for the day, the market capitalisation lost N29.83 billion to close at N2.489 trillion compared with the N2.519 trillion it finished a day earlier, and the NASD Unlisted Security Index (NSI) crashed by 49.84 points to 4,160.46 points from 4,210.31 points.

Market activity improved yesterday, as the volume of transactions rose 179.5 per cent to 10.4 million units from 3.7 million units, but the value of trades declined by 68.4 per cent to N29.9 million from N95.0 million, while the number of deals weakened by 11.5 per cent to 46 deals from 52 deals.

Central Securities Clearing Systems (CSCS) Plc remained the most active stock by value on a year-to-date basis with 38.4 million units worth N2.4 billion, Okitipupa Plc followed with 6.4 million units traded at N1.1 billion, and FrieslandCampina Wamco Nigeria Plc transacted 6.3 million units for N584.3 million.

Resourcery Plc ended the trading session as the most traded stock by volume on a year-to-date basis with 1.1 billion units valued at N415.6 million, trailed by Geo-Fluids Plc with 130.8 million units valued at N504.5 million, and CSCS Plc with 38.4 million units worth N2.4 billion.

Economy

Naira Trades N1,366/$1 at Official Market, N1,400/$1 at Black Market

Published

15 hours ago

14/03/2026

Adedapo Adesanya

By Adedapo Adesanya

The Naira continued to claw back some gains against the Dollar in the different segments of the foreign exchange (FX) market, as its value was strengthened on Friday.

In the black market, it gained N10 against the United States Dollar yesterday to close at N1,400/$1 compared with the preceding day’s rate of N1,410/$1, and at the GTBank forex counter, it chalked up N6 to close at N1,385/$1, in contrast to the N1,391/$1 it was traded a day earlier.

Similarly, in the Nigerian Autonomous Foreign Exchange Market (NAFEX), it appreciated against the greenback during the session by N5.28 or 0.38 per cent to quote at N1,366.23/$1 versus Thursday’s closing price of N1,371.51/$1.

It also improved its value against the Pound Sterling in the official market on Friday by N21.81 to settle at N1,812.99/£1 compared with the previous day’s N1,834.80/£1, and gained N13.86 against the Euro to sell at N1,568.03/€1 versus N1,581.89/€1.

Pressure eased further on the FX market as the Central Bank of Nigeria (CBN) continued interventionist operations this week, selling Dollars to banks to boost liquidity after a $500 million boost last week.

This was complemented by inflows from foreign investors, exporters and non-bank corporates, among others, while Nigeria’s gross external reserves remained above $50 billion, the highest since 2009.

The Governor of the apex bank, Mr Yemi Cardoso, also eased fears of a Naira devaluation, saying the country’s financial system has been strengthened by reforms.

Regardless, external pressure looms as the US Dollar strengthened globally due to its war with Iran, now ongoing for three weeks.

Meanwhile, the cryptocurrency market was largely down as traders and investors continue to align with current realities.

The market is adapting to the conflict in real time. Early in the war, every headline produced an outsized reaction because nobody could price the tail risk. Now, traders have a framework where strikes happen, oil spikes and bitcoin dips only to recover again.

Cardano (ADA) depreciated by 3.8 per cent to $0.2623, Dogecoin (DOGE) lost 1.7 per cent to finish at $0.0948, Ripple (XRP) slumped 1.5 per cent to $1.39, Solana (SOL) dropped 1.4 per cent to sell for $87.33, Binance Coin (BNB) went down by 1.3 per cent to $653.58, Bitcoin (BTC) declined by 1.1 per cent to $70,670.63, and Ethereum (ETH) decreased by 0.9 per cent to $2,078.78.

However, TRON (TRX) appreciated by 1.7 per cent to $0.2941, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 apiece.

Economy

Oil Stays Above $100 as Strait of Hormuz Traffic Stalls

Published

15 hours ago

14/03/2026

Adedapo Adesanya

By Adedapo Adesanya

The price of the major crude oil grade, Brent crude oil, closed above $100 on Friday for the second consecutive session, as the Iran war heads toward its third week, with oil tanker traffic through the Strait of Hormuz still effectively at a standstill.

It gained 2.67 per cent or $2.68 during the trading day to close at $103.14 per barrel, while the US West Texas Intermediate (WTI) crude oil grade appreciated by 3.11 per cent or $2.98 to settle at $98.71 per barrel.

Brent futures were up about 10 per cent for the week following the 27 per cent rise seen last week, which marked the biggest weekly gain in oil prices since the COVID-19 pandemic in 2020. WTI futures, which saw their best week since 1983 last week, ended the week more than 8 per cent higher.

US President Donald Trump said American forces launched a major bombing raid on Iran’s strategic Kharg Island, targeting military facilities on the key Persian Gulf outpost while warning Iran that its vital oil infrastructure could be destroyed if shipping in the Strait of Hormuz is disrupted.

The terminal accounts for roughly 90 per cent of Iranian crude shipments, loading millions of barrels per day onto tankers bound largely for Asian markets.

The US and Israel’s strikes in the conflict have largely targeted Iranian military and nuclear infrastructure. Oil facilities elsewhere in Iran have been hit, but Kharg’s massive storage tanks, jetties, and pipelines had remained untouched until the latest strike.

Iran’s new supreme leader, Mojtaba Khamenei, vowed to keep fighting in a message delivered via state television.

There have been a number of attacks on foreign ships in or near the Strait, feeding into concerns that a prolonged war could translate to a global economic shock.

Prices are rising despite the US and its allies rolling out some measures to keep a lid on energy costs.

The International Energy Agency (IEA) has agreed to release 400 million stockpiled barrels, the largest such action in history.

The US has issued a 30-day waiver for India to purchase sanctioned oil from Russia. President Donald Trump is considering loosening rules under the Jones Act that require American ships to transport goods between domestic ports, including oil and gas, in an effort to lower costs.

Traders are continuing to monitor developments in the Middle East.