Insurers offer tonic for Buhari’s infrastructure development plan

Infrastructure development, a key plank of president-elect, Muhammadu Buhari’s electoral promises would be a success if his government considers insurance protection as one of the requirements for the award of contracts, analysts say.

The analysts say that insurance protection would ensure that projects are not abandoned, but quality is achieved and projects are completed in record time. Also, they observe that in the event of failure, insurance moves in to indemnify, reducing the incidence of wastages of public funds through abandonment of projects.

The analysts add that the spate of project abandonment and loss of mobilisation funds across the country in the past, were huge and a major negative impact on budgets at state and federal government levels.

Mayowa Adeduro, managing director/CEO, Anchor Insurance Company Limited, said government should give priority to capital projects and capital expenditure, stating that this has a way of engendering development across sectors, including in insurance.

Adeduro says that government should change its policy on infrastructural maintenance, by adopting the retainership model, along with retainership insurance.

“Where a contractor fails, the government and the public will be looking up to the insurance companies that syndicate retainership insurance to step in and amend the default.” This frees the government of the headache of infrastructure decay and poor maintenance, Adeduro advised.

Adeduro further states that there is a need for government to budget for insurance appropriately and implement the budget. “Government needs to embrace insurance and stop the culture of extra-budgetary expenditure for unexpected but insurable events”, stating that “it has worked successfully in Lagos State.”

Paschael Egerue, incoming managing director/CEO of Enterprise Trust Insurance Brokers Limited says insurance has a big role to play in infrastructure development, both in capital formation and mortgage refinancing for the housing sector.

Egeru says insurance companies issue guarantee bond for contract projects from counterpart approval process to implementation, emphasising why government should strengthen this requirement to avoid persisting abandonment of projects.

He also blames the non recognition of insurance bonds to desperation of the banks, and ignorance on the part of the public, who believe that bank bonds are better than insurance, whereas insurance benefits outweigh bank bonds, and are cheaper.

Egeru further urged the incoming government to unlock the bottlenecks frustrating land acquisition, stating that land laws are drawbacks to housing development and infrastructure financing in Nigeria.

Joseph Ogah, partner, Premium Debate, said government projects would be more successful if at the time of contract approval, there is an insurance backing, like a bond, that protects the project against abandonment and quality maintenance.

Developed countries insure projects against failure, and it is only appropriate that government begins to emulate successful societies, so that issues of poor quality projects, abandonment and embezzlement of infrastructure fund by contractors are reduced as much as possible, Ogah observed.

Before the March 28 Presidential election, where Buhari emerged as president-elect, key in his campaign promises was to create an enabling environment for all stakeholders, with unprecedented rebuilding of infrastructure, structures and systems.

“We will tackle infrastructure gap because with the relevant infrastructure in place, we will begin to function like a world-class economy, attracting massive foreign direct investments”, Buhari was quoted as saying in one of his campaign promises.