Nigeria: Recapitalisation - NSE Boss, Onyema, Bullish On Insurance Sector

11 December 2019

The Chief Executive Officer, Nigerian Stock Exchange (NSE), Mr. Oscar Onyema yesterday said the ongoing recapitalisation exercise in the insurance sector will present new opportunities for mergers and acquisitions and bring about efficiency, innovation and profitability.

Onyema stated this at the NSE Insurance Sector Forum with the theme: "Recapitalisation: A Panacea for Insurance Industry Growth," held in Lagos, which was sponsored by Coronation Merchant Bank.

According to him, the upward review of the paid-up capital of the insurance sector would strengthen the growth and development of the sector, noting industry has grown remarkably over the years, generating a gross premium income of N448.6 billion in 2018, reflecting a 12 per cent growth from 2017.

He said:" The industry also recorded an increase in its asset base by an estimated sum of N1.3 trillion as at December 31, 2018, reflecting a 17 per cent compound annual growth rate over the last three years. According to the National Bureau of Statistics, the Insurance sector recorded a nominal growth rate of 6.69 per cent and a real GDP growth rate of 3.96 per cent in Q3 2019 from 4.48 per cent in Q2 2019 and 1.03 per cent in Q3 2018. Although, this data indicates a positive outlook in the Nigerian insurance industry, the reality and headwinds faced by operators in the sector are quite formidable. Many licensed insurers are largely undercapitalised, thus limiting their ability to take on big ticket in-country risks, as is often required in the oil and gas, marine and aviation sectors."

The NSE boss explained that the insurance industry presents perhaps the most remarkable investment case of any industry in Nigeria, stressing that despite present challenges, it presents numerous opportunities for enhancing the economic fortunes of this country.

"Foreign investors, recognising these opportunities have acted accordingly with the likes of AXA, Prudential, Liberty, Swiss Re, SUNU Group, Saham Group, taking strategic positions in the industry. An estimated capital of N200 billion is expected to be injected into the Nigerian insurance industry post-recapitalisation with a 400 per cent increase in the minimum capital required for life, 333 per cent for non-life, 360 per cent for composite and 200 per cent for re-insurance. While I am optimistic that this directive by the industry regulator would enhance performance, bring about efficiency, innovation and profitability, the industry needs significant support to unleash its growth potential," he said.

Onyema added that at the NSE, they see close parallels between this recapitalisation and that of the banking sector in 2005, noting that the immense growth seen in banking industry in large part can be attributed to successful capital raised through the capital market.

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