The rising insecurity in Nigeria that has made travelling across cities difficult, which has sent farmers out of the farms and keep frustrating economic activities across sectors, is impacting negatively on the growth prospects of insurance companies.
These cries are also increasing the liability of insurance companies with claims arising out of damaged properties, loss of lives, loss of investments caused by armed bandits and terrorism.
According to some insurance operators that spoke on the development, their new investments in the agricultural sector intended to help boost food security in Nigeria and increase productivity are being disrupted by high insecurity in that space.
According to them, there are huge claims coming from insured lives, claims from destroyed farms, as well as growing loss of job, which are impacting the bottom-line and threatening solvency state of the risks carriers.
Mayowa Adeduro, managing director/CEO, Law Union and Insurance Plc, responding to BusinessDay email enquiries, states that the growing insecurity in the land portends grave danger to the economy and the economic players.
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To him, the insurance industry is going to witness a very difficult time in income generation, cost control, increase in claims and likely increase in reinsurance cost, and the margin of return on equity will be impacted significantly, depending on how each company is able to respond to the issues.
“Predictably, travelling across the length and breadth of Nigeria has been curtailed significantly because of activities of hoodlums, bandits and other criminal elements. This is impacting the revenue of transportation, logistics and aviation sectors. The airlines have resorted to increase of ticket to cover for inadequate passengers and flight frequency apart from other inflationary pressures,” he says.
Again, he notes that due to mass exodus of farmers from their farming land to safety abodes, we are at the threshold of food insecurity evident now in the rising prices of food in the market.
“Average size a tuber of yam goes for about N1,500 now and a bag of Garri goes for N30,000 in Lagos market. Inflation is trending up at an alarming rate; food inflation is expected in the region of 19 percent by next report of NBS,” he notes.
Adeduro also points out the growing levels of unemployment, underemployment and loss of employment, which he notes has shot up the misery index to a dangerous level that the rich are now afraid to display their affluence.
“Despite the cash incentive from CBN, forex inflow into the economy is at all-time low because forex don’t necessarily follow cash incentive but stable investment and secured investment climate,” he states.
According to experts, disruption of economic activities with pervasive insecurity comes internal displacement of people and the crippling of economic activities in the worst-affected areas, having seen agricultural produce in Benue and a number of other north-central states of Nigeria being badly affected by the herdsmen-farmers clashes.
The experts also point to loss of consumer confidence, where protracted insecurity, as it has been the case in recent years in Nigeria, which in turn reduces consumer spending, and this will have increasing negative impact on insurance consumption.
Supporting the argument, Tunde Oguntade, vice president of the Nigerian Council of Registered Insurance Brokers (NCRIB), says the question on impact of insecurity on insurance business could be in two different directions, depending on where you are looking at it from.
He says insecurity could mean opportunity to sell more insurance like terrorism related products, but unfortunately that is not still common in this part of the world.
But that insecurity could mean loss of revenue from economic activities, increasing liability for insurance and insolvency if the bottom line of the insurance companies that are affected much.
Meanwhile, Bola Onigbogi, president/chairman of Council of the NCRIB, speaking in Lagos, Wednesday, lamented the state of insecurity in Nigeria, saying, “To say that the rate of killings and kidnapping in Nigeria is endemic is to state the obvious.”
According to her, the recent rate of attacks on people in most part of the country is so disheartening, as its worrisome seeing how Nigerians are being massacred in their own fatherland unabated.
She however called on the Federal Government, as a matter of urgency, to declare a state of emergency on terrorism and killings, especially in the Northern part of Nigeria.
Onigbogi said it was important that something was done as soon as possible, otherwise it would deter investors from investing in Nigeria’s economy.”
