Can Insurance Lead Nigeria's Economic Stabilization?

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Monday, May 11, 2020  / 12:55 PM  /By Ekerete Ola Gam-Ikon / Header Image Credit: Business Town


Sounds unthinkable, indeed preponderous and only worth considering due to the season we are in, when the strongest and smartest are, afterall, not as we thought. Right? These are times that the solution to the biggest problem the World has may be in the field of a war-torn or disease-infested African country. Who can tell?

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Some solutions are discovered through humility or in those moments that we choose to give benefit of doubt to the promoters. You will surely need good measure of humility as you read this.


My intention is to discuss three deadly threats to our economic recovery and growth then point out how insurance, the least understood financial instrument, can see us through this period of surviving and, subsequently, thriving.


Deadly Threats, Insurance Solutions


1. Our Preference for Currency 

Arguably, at the top of the minds of most Nigerians is NOW, and ACCESS to those things - money, qualification, political power and anything that can make the current time meaningful. Someone is thinking and probably saying "We cannot wait, only fools do that in the face of what we see or think is going on." To a large extent, the basis of qualification for everything seems to have become one's ability to show that you want it NOW! 


Interestingly, this is a common phenomenon amongst the rich and poor and breaks through all biases one can imagine. 


However, we can only wait to see if the lessons from COVID-19 pandemic have had any impact on our psyche to make the way for any alternative thinking.


During this pandemic and lockdown, our preference for currency did not abate and became even more evident with the mammoth movements across the country on the first day that the lockdown was eased by the Federal Government. 


So, why is there such high level of preference for currency, if you like money, amongst us?


Not a very easy question to answer but I think our preference for currency (money) grew to fill the TRUST gap created by the disappointing acts of governments and the legal system we put in place.


When we started failing to pay pensioners (remember this was originally insurance) and we saw pensioners dying on the queues while waiting to collect their entitlements, we were shocked towards a certain direction. Current workers, then preferred to help themselves with monies meant to provide all of us with better quality of life, and we did not know how deep down we were going with that habit of helping ourselves NOW with what was meant for the future. Then, the final hope of the poor, the law courts, were caught in this trend to complete the picture.


Simply put, insurance, which was meant to serve as the stabilizer for both the retired and active workforce across every strata of our national life had been removed and replaced with our currency mentality.


If we agree even by fifty percent that this is our situation, then we have to BRING INSURANCE BACK to play its role as stabilizer and trust holder!

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When people can BELIEVE that upon retirement their full entitlements will be paid and if they fall ill or have accidents, they will receive medical care or even when they lose a loved one, the benefits from his/her insurance policy will be promptly paid, the tendency to grasp and grab NOW will ebb. Afterall, as we have found out during this COVID-19 period, our needs remain basic. 


We will only have to ensure that the system of paying entitlements as at when due is seamless, convenient and untainted with the kind of unprofessional behaviour we see today.


2. Culture of Informality 

Another threat that we have to address with insurance is what I call our culture of informality. 


As I have found out, our lives are essentially defined on the basis of two-pronged traditions of RELATIONSHIP and SERVICE. Governments, businesses and individuals have lived and thrived on either of them or a combination of both, which has worked, sometimes, excellently depending on the one that was first put forward.


In Nigeria, we have promoted relationship too far with little attention to service, such that any discourse on the latter is viewed as a revolution or an affront, therefore relationship is deployed to quash or crush it.


Today, unsurprisingly, we have a humongous informal sector that requires lessons on the philosophy of service. The greatest challenge is making players in our informal sector understand why they need to be in a certain financial condition (service-oriented) to be sustainably valuable to their customers (relationships).


That financial state of having a separate bank account from their personal account, having insurance for their businesses and families, building a good credit history and having periodic audited reports continue to elude our informal sector players because of the culture of informality. 


Several commendable efforts to formalize our informal sector have been mostly inclined towards having bank and payment account without consideration for the kind of protection that insurance can provide.


Credit Life Insurance has increasingly slipped into discussions as credit becomes more active in the process of formalizing the informal sector. Other insurances are following suit but might suffer setbacks resultant from our preference for the culture of informality.


A more threatening trend has emerged where small and medium enterprises simply pay to obtain documents that seek to prove that they have insurance for their employees while indeed such employees do not exist.


To save our economy and get on the path of stabilization, the Federal Government of Nigeria must be willing and ready to "put insurance on the economic menu" that she is serving the Micro, Small and Medium Enterprises (MSMEs), which dominate the informal sector. 


Providing intervention funding for SMEs without insurance is akin to recycling the condition which they were before such intervention.


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Let me mention here that if insurance had been used to enable the utilization of the N220b SMEs Intervention Funds set up by the Central Bank of Nigeria (CBN) years ago, we would probably have had a couple of large enterprises emerging from that intervention. 


As we embark on current intervention funding for SMEs under the COVID-19 stimulus package  intended to create a new Nigeria according to CBN, only one percent of the insurance needed has been mentioned, hence revealing clear evidence that another intervention fund will be required some years from now.


With full insurance against losses and damages to the lives and properties of individuals and businesses within the informal sector, Nigeria will be sure to have the kind of economic recovery and growth that we have seen in Asia in recent years.


Formalizing the informal sector without the full complements of insurance is simply unwise as we pursue economic stabilization post COVID-19. 


3. High Mortality Rate

The third threat to our national identity that can be addressed by insurance is our high mortality rate.


Reliable data from Nigeria Demographic Health Survey (NDHS 2018) shows that "the under-five mortality rate in Nigeria is 132 per 1,000 live births meaning that 1 in 8 Nigerian children never reach the age of 5."


In 2015, adult mortality rate for Nigeria was 32.45 deaths per 100, according to an online source.


The reasons for these reports are not far-fetched as more Nigerians now know about the deplorable state of our health facilities, lack of access to quality delivery services and the cost of treatment to mention just a few.


One way to address the issue of high mortality rate amongst our population of children and adult is health insurance, which was formally introduced into Nigeria in the late 90s. Unfortunately, rather than solve the problems identified, it has compounded them and left over 90 percent of Nigerians without health insurance, deployed in other climes to support improvements in healthcare delivery.


The poor communication regarding access to health insurance seems to be the greatest amongst these challenges. Only a few discerning Nigerians know that health insurance policies are available in conventional insurance companies besides what can be obtained from Health Maintenance Organisations (HMOs) for groups of persons.


Having appropriate health insurance policies for Nigerians across all strata would not only save the lives of our people but would also avail the health sector the needed funds to develop and maintain facilities and  delivery services that can be compared to the standards elsewhere. 


Just imagine if every Nigerian that has the National Identity Number estimated to be over 48m now had health insurance worth N10,000 per person per annum, we would have improved our healthcare system and the quality of our lives.


When we have health insurance, we will not be afraid of approaching health professionals who are swayed by monetary considerations before providing medical attention to persons that need them.


Innovative Health Insurance accompanied with Travel Insurance and Individual Life Assurance are all that Nigeria needs Nigerians to have to tackle our high mortality rate.


We need more of our citizens to be alive and focused on contributing to the recovery and growth of our national economy.


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Insurance Assures No Losses

Practically every sector and their actors need a vibrant insurance ecosystem to work confidently and deliver uninterrupted services.


The insurance industry in Nigeria has consistently provided the stability that the oil and gas, construction and manufacturing sectors enjoy by settling claims which enable them continue their businesses, and now we need to extend same to agriculture, renewable energy, logistics and trading to boost outcomes.


Ignoring the insurance industry in Nigeria probably because of her perennial problem of poor service culture whilst making efforts towards economic stabilization may amount to doing the same things and expecting different results.


When will the man or woman that quietly ensures the continuity of our ecosystems be brought into the room for the brainstorming session to enable us see the end from the beginning?


Gladly, the insurance industry has indicated her readiness to participate by the recent announcement of N11b (COVID-19) insurance cover for 5,000 health workers and professionals, so this would surely be the best time to let insurance take the lead.


Yes, hear this; it is one of those new normals we will have post COVID-19!


About The Author

Ekerete Olawoye Gam-Ikon, MNIM, CPP, is a management consultant with a specialization in Strategy and Insurance. He is available through e-mail


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