Agusto & Co, a credit rating agency has projected a slower growth for the Nigeria insurance industry in 2019 on the back of expected slowdown in economic activities in this election year.
“Our forecast for insurance industry in 2019 is a 10 percent growth in Gross Premium Income (GPI),” Ada Ufomadu, a Senior Financial Institutions Analyst at Agusto & Co, told BusinessDay on Tuesday.
This is however two percentage points less than the 12 percent reported by the industry in 2018.
Explaining the reason for the lower expected growth, Ufomadu said it is because, “like we all know 2019 is a political year. Although it is a re-elected administration, it will take a while for them to settle in and we think it may slow down a bit on.
In 2018, the Nigeria insurance industry generated premiums of about N448.6 billion, which reflected a 12 percent growth year- -on-year.
With the 10 percent growth projection by Agusto & Co the Industry’s GPI is expected to be at N493.4 billion in 2019.
While the Lagos-based rating agency is optimistic that there will be a growth, it is also sure the political environment may slow that growth down.
“However, growth will come from a slightly better operating environment driven by an improved operating climate as well as opportunities in oil & gas (particularly refinery) and engineering considering the Dangote projects that are ongoing – the refinery and fertilizer manufacturing plants.
At about 40 miles east of Lagos, on a more than 6,700 acres of former swampland bound by a lagoon and the Atlantic Ocean, lies the Dangote fertilizer plant valued at $5 billion which is in the final phase. Next to it is the construction of a vast oil refinery-a $12-billion project which, according to Africa’s richest man, Aliko Dangote, will be ready by 2020.
“By 2020 I will finally dispatch oil,” he said in January.
With the volume of GPI reported in 2018, the penetration ratio of Nigeria insurance industry stands at 0.5 percent, one of the lowest in Africa compared with countries like South Africa (17%), Kenya (2.8%) and Ghana (1.1%).
According to industry sources, the low penetration ratio presents huge opportunity for growth and as such the sector is tagged as one in a growth phase.
“The penetration ratio of 0.5 percent means that it is a growing industry, it has potential for growth in the near term,” Ufomadu said.
She added that the ratio has been on that level for as long as she could remember, “although it is improving as GDP is also growing, and so GPI is growing but at a very slow pace. It has been in the region of 0.3, 0.4, 0.5 and 0.6.”
BusinessDay checks revealed that out of the about 99.6 million adult population in Nigeria, a 2018 survey by the Chartered Insurance Institute of Nigeria (CIIN) showed that about 86.6 million Nigerians do not have any form of insurance cover.
Among other factors responsible for the poor insurance patronage is low disposable income on account of the sluggish economic growth.
“More Nigerians won’t and don’t intend to take up any form of insurance cover if given the choice,” CIIN noted.
Explaining why many Nigerians don’t consider acquiring an insurance cover as a priority, Jim Ovia, the Founder/Chairman of Zenith Bank Plc, said in a statement that the major problem “we see in the Nigerian market is that per capita income of the people is very low and people tend not to take insurance as a priority against other things related to them.”
