Growing political tensions ahead the 2015 elections and rising insecurity in some parts of the country, could geopardise the anticipated growth in the insurance industry, analysts have said.
Some analysts had predicted a surge in insurance business on the back of the forecast of heavier rains and storms this year, but added that rising tensions ahead of the 2015 elections, along with restiveness in some northern states could scuttle this growth.
It had been anticipated that based on the damage to property typically suffered during heavy rains and storms, Nigerians would be moved to take up more insurance to mitigate the heightened possibility of losses.
Linking the insurance sector’s fortunes to those of other sectors of the economy, the analysts said the near comatose state of business in some northern states of the country and the rising tensions nationwide, were surely retarding growth.
These developments they argue, would likely stifle the insurance sector.
Sunday Thomas, director-general, Nigerian Insurers Association(NIA) expressed concerns about the rising insecurity in the country. He added that since insurance is a unit of the larger economy, what affects other sectors of the economy was sure to affect insurance.
Thomas however prayed that the efforts of government to tackle insecurity in the country would yield good result before the 2015 elections.
“In the political terrain, there have been a lot of security issues which have affected us in terms of lives and properties, especially in the northern part of the country; the ‘Boko Haram’ situation readily comes to mind, said Jide Orimolade, executive director, AIICO Insurance plc.
Standard & Poor’s Ratings Services in its latest report on the insurance property/casualty (P/C) business, says the risk level for Nigeria’s insurance sector is high, reflecting the difficult operating environment.
“Nigeria has strong overall economic growth but per capita income is still low and it suffers from heightened political tension, low levels of economic development outside the oil sector, significant infrastructure shortfalls, and weak institutions.
“In our opinion, political risk will likely increase, as infighting within the ruling People’s Democratic Party (PDP) builds, and political parties jockey for position in the forthcoming 2015 elections.”
“Generally, we expect weakness in the country’s rule of law, combined with the effects of corruption, to restrain growth and pose a continuing risk to the insurance sector.”
S& P considers that the jihadist Boko Haram group’s militant activity has had a limited effect on Nigeria’s political stability. “Nevertheless, it could continue to exacerbate Nigeria’s north-south divide in terms of investment, growth, and wealth, while insurgency in the Niger Delta has been relatively low since the 2009 amnesty, and we expect this to remain so. Nevertheless, the potential impact of insurgency remains high, because it could disrupt oil production.”
According to the S & P report, the Nigerian economy will expand by about 6.3 percent per year, through 2014-2015, which is stronger than the global average. Considerable natural resources support the economy, but the non-oil economy has largely fueled growth for the past few years.
“Key non-oil growth sectors include agriculture, trade, and services. Growth in these sectors should broaden economic diversification and create opportunities for the insurance sector. Nevertheless, we expect the economy, exports, and government revenues to continue to depend on oil in the medium term, which exposes domestic economic stability to oil prices.”
Modestus Anaesoronye
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