Adeduro
Mr. Mayowa Adeduro, Managing Director, Anchor Insurance Limited, in this interview with Vanguard Insurance, bares his mind on the operating environment in 2016, expectations in the current year and other issues affecting insurance business in Nigeria. Excerpts:
LOOKING back at the business environment in 2016, what are the hopes this year?
2016 was the most difficult year for the country. Though, we all understood what happened. A situation where by the oil price crashed by more than 50 percent; a situation where there was bomb blast everywhere; we were nearly in war, you have a situation where restiveness was on the high side in the Niger Delta region to the extent that we were producing less than 50 percent of our capacity in terms of quantity of oil per barrel. You can juxtapose all of that. Scarcity of the dollar also affected the manufacturing sector. Therefore, it was already known how we got into recession.
Anchor insurance MD How did it impact on the operating environment?
The operating environment in 2016 in terms of regulation no doubt was quite challenging. Although, we understand why the regulator had to be bullish because when an environment like that is not well regulated such that people play by the rule, the entire system can collapse. So, the reason for bullish regulation is obvious. But in terms of sector performance, I think we fared well when you compare insurance with other sectors. Look at the insurance sector and compare it to manufacturing; insurance sector and banking sector; Insurance and Aviation sector, even oil and gas sector, you will see that we didn’t do so badly as an industry. Oil and gas sector was crawling; banking sector was also struggling with so much of non-performing loans. Aviation was almost in comatose and even state governments could not pay salaries.
What are your expectations for the insurance sector 2017?
My view may be because of my faith; the worst is over for Nigeria. Having seen a budget of N7.3 trillion, I have seen the opportunities both in the capital and recurrent expenditure. This is the first time government is budgeting this much for capital expenditure and we believe most of this expenditure will need insurance expense. We want to thank God for the success in the war against Boko Haram. It’s almost over. What that means is that government can now inject what has been spent on prosecution of war to infrastructure and other needy sectors of the economy. We are also noticing that the restiveness by the Nigeria Delta militants are reducing following Federal Government’s engagement with them and one good thing that has happened this year is the rising of oil price, and if this continues we expect that there will be more dollars in the economy. So, we expect some of the manufacturing companies closed down to come up again. There are refineries coming up here and there including that of Dangote, and all of these will spike activities in the economy and insurance will benefits from it.
What are issues driving the insurance industry this year?
The key issues have to do with the regulatory environment. Our regulator has announced that it will roll out a template for recapitalization in 2017, so that will alter the paradigm in the system. The risk based capital will affect some operators having small capital base or whose shareholders’ fund is low; it will also affect human capital ability to manage risk along the line. I foresee more and more foreign firms coming into the country to buy up some insurance companies because it is easy for them to bring in their dollars to buy up these companies now at very cheap prices. More and more companies will be bought over. I see more mergers and acquisitions here and there in the industry. Again, companies that are not ready to play with technology and look at the retail space will have their margin thin out because if you look at the formal sector the margin is thinning out.
What is your advice to the industry this challenging period?
The only way out for the industry is more and more collaboration. I do not subscribe to the fact that we need a regulator to come and regulate product rates for us because the data to compute what is economic rate is with each and every one of us.
Vanguard
