At Oriental News Summit, oil, insurance stakeholders bemoaned low level of compliance with mandatory insurance provisions
Chief Executive Officer, Centre for the Promotion of Private Enterprise, CPPE, Dr. Muda Yusuf, has decried the low level of compliance with the mandatory insurance provisions as provided by the Nigerian Constitution.
Yusuf disclosed this while speaking at the 2023 Oriental News Summit with the theme Building Local Content Synergy between the Oil and Gas and the Insurance sectors in Nigeria on Thursday, July 20, 2023.
He said that this was one of the major reasons for the huge disconnect between the N202 trillion Nigerian economy and the insurance sector with just N647 billion, which is a mere 0.32% contribution to the GDP, when the industry is supposed to be responsible for driving economic growth in any country.
One of such legislation that has been flagrantly neglected, as stated by Yusuf, is found in Section 49 [1] and section 50 of the Nigerian Constitution.
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While Section 49 [1] states among other things that “All operators, project promoters, alliance partners and Nigerian indigenous companies engaged in any form of business, operations or contract in the Nigerian oil and gas industry, shall insure all insurable risks related to its oil and gas business, operations or contracts with an insurance company, through an insurance broker registered in Nigeria under the provisions of Insurance Act as amended.”, Section 50 of the same constitution states, among other things, that “No insurance risk in the Nigerian oil and gas industry shall be placed offshore without the written approval of the National Insurance Commission, which shall ensure that Nigerian local capacity has been fully exhausted.”
He said that the federal government and the National Assembly had played their roles in laying the foundation for the desired synergy; it remains for the industry players, working with the regulators in both sectors, to take advantage of the prospects.
Yusuf also explained that there are other comprehensive complementary provisions in the act that outlines clear monitoring and evaluation framework to ensure compliance with the provisions of this Act.
He, however, assured that the sector has enormous prospects for growth amid the huge potentials that exist in Nigeria and called on the industry players to take advantage of these potentials so that there can be an alignment between the growth in the insurance industry and the economy.
“The opportunities for synergy between insurance and oil and gas sector are immense. But we need a solid framework for collaboration and partnership between the insurance community, the oil sector investors, the NAICOM, and the NCMDB to be put in place to harness the enormous potentials
“The sector contributes to the growth of the economy through the provision of risk indemnification and transfers. The industry players also deliver value as institutional investors in the economy.
“The oil and gas sector is the life wire of the Nigerian economy. The value of the sector is N12 trillion, based on its contribution to GDP in 2022. Although the sector contributes just about 7% to GDP, it provides about 90% of the foreign exchange earnings in the economy. These foreign exchange earnings are critical for our foreign reserves, exchange rate stability, and balance of payment position.
“The oil and gas industry in Nigeria is a multi-billion dollar industry. With ongoing reforms, the prospects for the growth of the industry have heightened considerably. This offers corresponding growth in opportunities for insurable risks.
“And only recently at the Nigerian Oil and Gas Opportunity Fair (NOGOF) in Yenagoa, Bayelsa State, new investment prospects valued at over $50bn were showcased by international and indigenous companies. These prospects are projected to be developed within five years. These are phenomenal opportunities for the insurance industry,” he said.
“In conclusion, let me advise insurance industry players to strengthen their public policy advocacy to boost the demand side of insurance. This should focus on the following:
Ensuring compliance with current provisions with respect to mandatory insurance. The current level of compliance is extremely weak.
Promote and deepen insurance premium subsidies in critical areas of the economy such as agriculture, health, and climate change projects.
Deepening financial literacy to create awareness for insurance products.
Tax incentives on insurance premiums.
On the supply side, industry practitioners need to strengthen domestic capacity in the following areas:
Capital adequacy
Claims management
Trust level and perception issues.
Use of technology
Professionalism in the conduct of intermediaries.
High corporate governance principles.Innovative marketing and customer focus,” Yusuf added..
