Nigeria’s insurance industry is a “screaming opportunity” while demand for good quality schools far exceeds supply, creating opportunities for investments, Danladi Verheijen, managing partner and co-founder of Verod Capital Management, a Lagos-based private equity fund manager which invests across multiple sectors in Nigeria and Ghana, have said.
The insurance density or gross premium per capita of Africa’s biggest economy is $6.20, about 16 times lower than what is obtained in Morocco, and about 123 times lower than South Africa, a pointer to the fact that insurance is still literally at the starting point; while a larger number of Nigerians are prioritizing educating their kids to the best extent possible and will send their children to as good a school as they can afford, Verheijen said
“The current size of the insurance industry in Nigeria is a screaming opportunity,” he said.
“We think the education space is extremely interesting as well. Historically, the best schools were government-run, but over the years, the quality of public-sector education has declined. There have always been private schools in Nigeria, but most were linked to religious institutions; now there’s a growing number of for-profit schools. Nonetheless, there is still a deficit of quality educational facilities in Nigeria and Ghana, with demand for good schools far exceeding supply,” Verheijen said in a second phase of an interview with How we made it in Africa, an online news medium.
According to Verheijen, several factors are driving the demand for insurance in Nigeria. The first is regulation, where proof of insurance is now required for more things, e.g. accessing bank loans, pension accounts, etc. These new regulations, he said, are pushing people – especially corporates – to insure more.
Nigeria’s demographics are the second factor contributing to growth in this sector. The country’s population of 200 million people, growing at 3.2 percent per annum, is expected to double by 2050 (which is not that far away). Nigeria’s average median age is 18 years old, and this young, growing, and dynamic population is great for the insurance industry, according to Verheijen.
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The third driver is new insurance products that meet the needs of the population, and the fourth is building significant awareness for these products. “Thus far, we have invested in life and general insurance companies and we are also looking at investing in health insurance firms. We’ve learnt you need to create insurance products that are simple to understand and easy to buy. We’re also exploring ways to let people move from paying annually for insurance to making quarterly or perhaps even monthly payments. There is a lot of room for innovation in this sector,” he said.
From pensions to agriculture down to manufacturing, Private equity Giant, Verod Capital has been bullish about the Nigerian economy having reaped enormous rewards from investing in companies like Emzor.
Verheijeh, In the first phase of the interview, said Verod is keen on investing in agricultural and manufacturing firms with strong import substitution drive.
In August this year, Verod Capital Management Limited, through its Eustacia subsidiary, acquired AXA Mansard Pensions Limited, a licensed pension fund administrator that offers retirement savings accounts and pension fund administration services to both private and public sector employees in Nigeria.
The transaction which was subjected to receipt of final approval from the National Pension Commission was done following AXA Mansard Insurance PLC divestment from its pension business.
The private equity firm noted then that it believes it was the ideal time to enter the market and that AXA Mansard Pensions provides an excellent beachhead from which to establish a consolidated position and positively contribute to the continued development of the industry.
With eyes in the insurance industry, it is not clear whether Verod will move to investing or acquiring some stakes in AXA Mansard Insurance.
The firm has also invested in K-12 private schools in Nigeria and has so far invested in two schools that collectively have eight campuses and close to 4,000 students.Verheijen said it would like to increase these numbers significantly.
“We are keen to invest in more schools that have great academic programmes and administrators, and where we can provide capital to help them grow. We also consider how we can create more value for our existing schools: i.e., can we offer after-school programmes or summer programmes? Or can we cut costs by consolidating purchasing supplies and services across our schools? We also think about how and where we can expand – for example, one of our schools opened the first standalone special needs school in Nigeria, for which there is massive demand,”
Read also: Verod Foundation strengthens learning platforms for students
“We’re also interested in investing in vocational training schools, but have not yet found any investible players operating in this space in Nigeria or Ghana,” he said.
While Verod is keen on investing in the Nigerian insurance, manufacturing, agriculture and educational industry, Verheijeh says the oil and gas industry is a no go area for the firm as it lacks the right expertise to play in the sector.
“We know many people have successfully invested in the oil and gas sector, but we just don’t know this sector and the volatility of commodity prices are a deterrent. After all, if the brilliant folks at leading investment banks around the world can’t predict the price of oil in a year or two years from now, then how can we? The same goes for mining or commodity-based sectors in general,” Verheijeh said.
“The other area where we don’t invest in large infrastructure projects. Nigeria has a massive need for these infrastructure projects – we need more roads, bridges, ports, railway networks, etc. – but these are not well-suited for standard private equity investors like us. We also don’t have much experience in this sector, and have instead chosen to focus on our core areas of expertise,” he added.
While opportunities abound in the Nigerian economy, Verheijeh noted that one of the greatest risks for Africa’s most populous nation is not having enough jobs to meet the needs of its growing population.
“Our population boom could be a blessing – it means a huge source of potential workers if there are the industries to hire them, and a massive consumer base to sell into, if they can earn decent wages. But if we don’t create those jobs, then there’ll likely be unrest in the future,” he said.
