Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, yesterday, disclosed that Nigeria’s total banking assets have grown to over N24 trillion (about $150 billion).
This, according to her, would not have been possible without the 2005 banking sector reforms. Speaking at the opening of the National Insurance Summit 2014, in Abuja, the Minister said that before the reforms in the banking sector, the largest banks were only a fraction of the size of the top-five banks in South Africa with no Nigerian bank in the top-20 banks in Africa.
“Today, we now have six Nigerian banks among the top-20 in Africa and our banks have now spread across the African continent opening branches from Senegal to Kenya and from London to South Africa. These banking reforms also had major impacts on our economy by driving strong growth in the amount of bank credit provided to the private sector. In the past 10 years, we have had our banking reforms, which have led to the growth of Nigeria’s banks. We went through an initial phase of banking consolidation and then introduced additional prudential measures following the recent financial crises,”she said.
However, she said the Federal Government is seeking ways to invigorate the insurance sector for the next decade to ensure that it contributes to national economic growth.
“The insurance industry is an important component of the financial system in any country. Insurance helps in mitigating risks and thereby provides utility for individuals and also for corporations. From economics, we know that risk-averse agents facing uncertainty are better off with insurance as it helps them to smoothen their consumption and also improve their planning.
“As Finance Minister, I can tell you that a vibrant insurance industry promotes savings and investments, increases the overall financial assets in an economy and drives development of capital markets. In times of natural disasters (such as floods, hurricanes, droughts), insurance companies also help in providing financing to mitigate the social costs of catastrophes,” the Minister said.
But she regretted that the insurance companies in Nigeria are facing a lot of challenges and these impinge on their performance.
The challenges, she said, include lack of consumer trust, a fragmented industry with some weak and insolvent players, low enforcement of compulsory insurance policies, lack of professionalism by some agents and brokers in the industry, and a general shortage of skilled professionals in the entire industry,” she noted.
According to her, Nigeria’s insurance industry consists of the life insurance segment (about 1/4) and the non-life segments (about 3/4).
“Life insurance covers products such as term life, group life policies and annuities, while the non-life segment covers policies such as motor vehicle insurance, fire, accident, marine insurance and so on. Moreover, we have six classes of insurance, which are designated as compulsory namely, motor vehicle insurance, group life insurance, employers’ liability insurance, buildings under construction insurance, occupiers’ liability insurance and healthcare professionals’ indemnity insurance,” the Minister explained.
In his welcome remarks, the Commissioner for Insurance/Chief Executive, National Insurance Commission (NAICOM), Mr. Fola Daniel, noted the past reforms aimed at repositioning the insurance industry.
“The first notable initiative for the reform of the insurance industry was the Financial Systems Strategy (code-named FSS 2020) developed in 2007 to position the financial services sector to drive the vision of making Nigeria one of the most 20 developed economies of the world by the year 2020 and the financial centre of choice in Africa,” he said, adding that as at the end of 2013, the gross premium income of the industry only grew to N300 billion from N101 billion in 2007.
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