• Saturday, May 25, 2024
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BusinessDay

The changing face of the West African sub-region III

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Abimbola Agboluaje

Like the banking sector in  West Africa , the  insurance business too is going regional. West Africa’s insurance sector was created with the assistance of foreign partners by various governments. However, the few privately-owned insurance firms in the sub-region were financially incapable of regional expansion. This has since changed in Nigeria because of mandated recapitalization of the insurance industry that raised the minimum capital from N150 million for life insurers to N2 billion; for general business from N200 million to N3 billion; and from N350 million to N10 billion for re-insurers. The resultant consolidation of the industry (through mergers and acquisitions) reduced hundreds of very small and weak operations to 71 powerful conglomerates that immediately began to drool over the vast West African market.
Nigeria’s example has since been copied and implemented in Ghana and the Gambia two countries that are seeking to create insurance companies with solid financial base. Other countries including Sierra Leone and Liberia are wooing the Nigerians for the same reason. In Ghana too, Nigerian insurance companies are being begged to go beyond insurance and take advantage of opportunities in the country’s nascent oil industry. As a result, at least six Nigerian insurance companies acquired or bought majority shareholdings in Ghana’s insurance sector between 2007 and mid-2008.
While the private sector in Africa has clearly demonstrated that it has come of age in the two vital sectors of banking and insurance and, for the most part, do not seem to be waiting for the states in the region to lead regional initiatives in favor of intra-regional business expansion, it would be a mistake to assume that the state has become irrelevant. We have consistently maintained this caveat in this series that ends today.

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For example, it was the Francophone states that established the Organization for the Harmonization of Business Law in Africa (OHADA) that has begun to enhance private sector-led initiatives to create a common commercial legal regime. One OHADA goal is to replace archaic colonial laws with new property rights regimes that favor joint ventures, cross-border investments, and cross-border interest aggregation. And this as we speak is already in the bag. It is a good thing that some Anglophone countries like Nigeria are considering joining the OHADA system.
There is obviously a great economic advantage in creating as the OHADA system is doing, uniform modern commercial and anti-corruption regimes covering commercial law, organization of securities, bankruptcy proceedings, and discharge of liabilities, among others. We also happily note that in West Africa , regional private sector operators are seeking to jump-start a legal revolution against the severe judicial insecurity that hitherto undermined investment and economic growth. In Nigeria for example, lawyers are getting valuable experience in providing integrated cross-border legal, maritime, and other services to the large number of Nigerian investors allover West Africa.
The Nigerian private sector is also a very active investor in the airline, ground and maritime transport sectors that are engendering new forms of West African cultural identity.
The regional merchant shipping line, Ecomarine, is currently running container services between Dakar , Abidjan , Tema and Lagos . Ecomarine was founded by a consortium comprising African Business Roundtable, West and Central African Ports Management Associations, Transporters Association of Nigeria, the West African Enterprise Network, and Federation of West African Chambers of Commerce.
In this too, the governments of West Africa have been very helpful. It was the implementation of the ECOWAS-Yamoussoukro Agreement which liberalized the West African airspace that has enabled Nigerian private airlines including Bellview, AERO Contractors, Slok Air and Virgin Nigeria, as well as Ghana’s Antrak to operate air passenger services in West Africa .
One of the more successful vectors of this growing bottom-up regional integration is Nigerian-owned Bellview Airlines (founded in 1992) which has continued to provide the most enduring and consistent air link between Nigeria and its neighbors. The airline and its affiliate, Bellview Sierra Leone (that country’s national carrier,) have since grown into aviation sector leaders and flagship regional carriers. Bellview currently provides services to seven international destinations in Côte d’Ivoire , Sierra Leone , Guinea ( Conakry ), Liberia , Senegal , Ghana , the Gambia . Nigeria’s Slok Air, another rising regional leader, is also the national carrier of the Gambia.
These private regional transport initiatives are succeeding in a region littered with sad stories of collapsed state-owned carriers. Their attractiveness to investors is evident in the success of Nigeria’s ABC Transport Plc., one of the leading cross-border road transport providers serving small and medium-scale traders, students, tourists, civil society, government officials and industry executives across the region. When the company listed on the Nigerian Stock Exchange in 2006, its shares were over-subscribed.
The relative success of private sector-led initiatives in the banking, finance, insurance, and transport sectors in forging deeper regional integration in West Africa is an important development for those who preach state failure in Africa to note.
Overall, the region has made steady progress in the recent past although this positive trend now stands the risk of being damaged by the global financial meltdown. But buoyed by the evident energy of Nigeria’s private sector and the continuing cooperation of West African governments, the region will grow stronger and stronger and the question of state failure does not arise.