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Chuks Udo Okonta
Nigerians have been told to brace up for a new wave of insurers insolvency and eventual collapse of the insurance sector, owing to the policy on compulsory 50 per cent deduction from internally generated revenue of all government enterprises, of which National Insurance Commission (NAICOM) is included.
Lead Director, Transparent Protection Ltd/Gte (TPL), Sam Chukwuka Onyeka, PhD, stated this today at a press conference in Abuja, noting that the policy would trigger
weak and inadequate supervision by the insurance industry regulator, NAICOM.
He submitted that
pursuant to the ongoing efforts of the Federal Government to increase revenue and plug leakages in revenue collection, a new policy of compulsory 50 per cent deduction from the internally generated revenue of all government enterprises has commenced, adding that the policy is most welcome at this time of economic hardship largely precipitated by corruption and inefficiency.
He however, said the policy blanket and automatic application to all government enterprises as defined might be counter-productive in many respects, stressing that the fact is that most of the agencies included in the Schedule to the Fiscal Responsibility Act 2007, including National Insurance Commission are not involved in commercial enterprise.
Accordingly, their objectives will be largely frustrated if the requisite funds are taken away from them, Dr. Onyeka posited.
He noted that the position of his organisation is to fault the Federal Government on the policy as it affects NAICOM, whilst also blaming NAICOM’s management to have stood by and watched, after it had the opportunity to make a case for the exemption of NAICOM from the policy.
“We are recommending joint industry engagement at this time. If NAICOM cannot be fully exempted from the policy, then let the deduction be applied to its operating fund only,” he submitted.
He stated that
NAICOM is the regulatory body for the insurance industry in Nigeria and not an enterprise and revenue yielding agency of the federation, as it has been wrongly categorised, stating that the Commission is funded by the insurance industry through payment of statutory supervisory levy.
“This argument also applies to other regulatory bodies in Nigeria which are funded by the private sector. Under the provision of Part 5 of the National Insurance Commission Act 1997 (NAICOM Act), every insurance institution (as defined) is required to contribute a minimum of 1 per cent of its gross revenue as supervisory levy.
“The supervisory levy constitutes more than 85 per cent of NAICOM’s total revenue. Other insignificant sources of revenue for NAICOM include fines, and tender’s fees.
“Section 17 of the NAICOM Act established 4 different funds for the Commission namely, operating fund, education fund, security and development fund and reserve fund. Under Section 18 of the Act, the operating fund takes care of the day to day running of the affairs of the Commission and includes staff salaries and board remuneration. Under Section 19, the education fund sponsors technical development of the insurance industry and supports the Chartered Insurance Institute and the West African Insurance Institute, Banjul, The Gambia.
“Under Section 20, the Security and Development Fund caters for the insurance industry development and also act as crises intervention fund. This is very significant because, unlike the banking sector, the government has not provided for any sinking funds in support of the insurance industry.
“Section 21 provides that the general reserve fund is for reserves. The reserve which represents the net operational surplus in the operating fund at the end of every year is to be applied to such purposes and invested in such manner as the Board may, from time to time determine.
“NAICOM is technically the statutory trustee of the funds created by Section 17 of the NAICOM Act. The application of the 50 per cent compulsory revenue deduction, employing the Fiscal Responsibility Act 2007 (as amended by the Finance Act 2020, Section 62) has technically terminated the several funds established by Section 17 of the NAICOM ACT, with serious negative consequences for the insurance industry. In particular, regulation and supervision of the insurance industry will become an uphill task, as NAICOM’s financial capacity will be seriously weakened,” he posited.
Dr. Onyeka stated that
in light of the foregoing, the automatic revenue deduction policy is mistaken as it relates to NAICOM, stressing that accordingly, the Federal Government should consider exempting NAICOM from the application of the 50 per cent automatic deduction from internally generated revenue of government owned enterprises.
“NAICOM’s management is largely to be blamed for this ugly development. It ought to have long made a case for the removal of NAICOM from the schedule of the Fiscal Responsibility Act, 2007.
“Section 62 of the Finance Act 2020, which amended Section 22 of the FRA 2007, made room for exemption, through the Minister of Finance, and the National Assembly.
“This, it failed to do. TPL is confident that if NAICOM had requested for exemption through the Ministry of Finance, the situation would have been different,” he said.
He
recommended that
the insurance Industry as a body should make urgent representation to the Minister of Finance for exemption of NAICOM from the ongoing automatic revenue deduction policy, adding that in the event that no exemption from the policy can be obtained, then, let the policy be limited to NAICOM’s Operating Fund, while the Education Fund and the Security and Development Fund should be spared.
This he said would guarantee a relatively well-supervised and healthy insurance sector in Nigeria.
“If otherwise should to be the case, then, Nigeria must brace up for a new wave of insurer insolvency and eventual collapse of the sector, for weak and inadequate supervision.
He said the only way to avoid this might be to increase the amount of the statutory supervisory levy, stating that yet, this will surely be counter-productive, as the insurers will naturally push the difference into the premiums which they charge for insurance products, thus driving insurance products beyond the reach of Nigerians.
Recall that the Federal Government on December 28, 2023 directed the Office of the Accountant General of the Federation (OAGF) to immediately commence the presidential directives on 50 per cent automatic deduction from the internally generated revenue (IGR) of Federal Government Owned Enterprises (FGOEs). The directive was contained in a circular issued on Thursday by Minister of Finance and Coordinating Minister of the Economy, Wale Edun. The circular titled, “Re: Implementation of the Presidential Directives on 50% Automatic Deduction from Internally Generated Revenue of Federal Government Owned Enterprises (FGOEs),” was dated December 28, 2023. It read, “Further to Circulars Ref. Nos. FMFBNP/OTGHERS/lGR/CRF/12/2021 dated 20th December, 2021 on Revenue, Expenditure and IGR Remittances to the Consolidated Revenue Fund (CRF); the following guidelines are hereby issued for immediate compliance by all federal government agencies/parastatals for the collections, utilisation and remittances of IGR:
“All Ministries, Departments and Agencies (MDAs) that are fully funded through the Annual Federal Government Budget (receiving personnel, overhead and capital allocation) and on the schedule of Fiscal Responsibility Act, 2007 and any addition by the Federal Ministry of Finance (FMF) should remit one hundred per cent (100%) of their IGR to the Sub-Recurrent Account which is a sub- component of the CRF.” The CRF is an account in which revenues from taxes, statutory allocations from federation account, and other federally-collected revenues are deposited and disbursed.
About TPL
Established in 2012, Transparent Protection Ltd/Gte (TPL) is a pioneer membership-based, insurance sector-specific, non-government organization (NGO), registered under the laws of the Federal Republic of Nigeria. The objectives for which TPL is registered includes protection of the collective interest its members, who are primarily insurance policyholders, and to hold both the insurance institutions and the regulator accountable. Over the years, TPL has been in the forefront of raising insurance awareness at the grassroots, employing radio and TV channels. Also, TPL has succeeded in assisting countless number of insurance policyholders in Nigerian, to recover genuine unsettled claims against insurers. Likewise, TPL has filed and successfully prosecuted several public interest cases, aimed at holding the regulator accountable. TPL’s current programmes include community advocacy and public interest litigation.
Lead Director: Sam Chukwuka Onyeka, PhD, FIIN,
Programmes Manager: Isaiah Gere O. Esq.
Address: Plot 448A Lagos Crescent, Garki 2, Abuja.
Contact: Phone: 08032676950; 08159845982
Email: protransparentinsure@gmail.com
Website: www.transparentprotectionltd.com
