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Chuks Udo Okonta
Foreign investors seeking profit without adding much values are presently parading themselves in the insurance market seeking where to invest and later pull out having satisfied their avarice.
Investigations by Inspenonline revealed that these investors are engaging some companies, especially those they believed are in need of fund to stay afloat when the the recapitalisation exercise is revived.
According to one of the Managing Directors, whose underwriting firm was approached by one of the so called foreign investors, his company had to turndown discussions with the investor when they realised the investor was only interested in profit taking without necessarily bringing much to the growth of the company.
He noted that though his company needs fund, it would only bring on board investors that are willing to display its expertise in propping the the firm to a lofty height.
An observer who also spoke on the development noted that most of the foreign investors seeking opportunities in the insurance market are only looking at the large population of the country and that they are short term players who are ready to pull their investments whenever they hit their targets.
Coordinator Emeritus, Independent Shareholders Association of Nigeria Sir. Sunny Nwosu, who also spoke on the development recently at an annual general meeting of an insurance company, implored boards and managements of insurance companies to protect investments of minority shareholders.
He frown at situations where minority shareholders having contributed much to the growth of companies, are thrown away through as their stakes are sold to the acclaimed investors.
According to IProject in a report entitled: ‘Foreign Investment and Financial Growth of Companies in Insurance sector Nigeria’ the challenge of most developing economies like Nigeria today is their overdependence on foreign capital which does not bring positive impacts only but negative impacts as well.
The report noted that in spite the laudable benefits the Nigerian insurance sector stands to derive from the inflow of foreign capital (FDI) and its attending contribution to economic growth, improvement of the living standard of the people and the provision of social amenities, the problem arises as to what extent the Nigerian insurance sector and indeed the entire economy should depend on foreign direct investment.
It said in recent years, firms from Asia, the US and Europe invested heavily in equities and bond markets in Nigeria. But as institutional investors around the world battled to provide cushion for their credit markets which was thrown into unprecedented deficit as a result of the global credit crunch or financial meltdown, they had to pull out their funds from Nigeria.
Financial analyst say the implications of this capital flight is that local businesses in Nigeria may take a much longer time to recover because firstly local firms lack the financial muscle to cover the vacuum created by these multinationals, and secondly the FDIs will not return immediately even when the global financial market may begin to pick-up or stabilize.
Dependency theorist has also focused on how FDI of Multinational Corporation distorts business financial performance in developing nation economies. In the view of these scholars, distortion includes the crowding out of national firms, rising unemployment related to the use of capital intensive technology and a marked loss of political sovereignty.
Typically, multinational corporations in developed countries have actually become a threat to host countries as they are now subversive and exploitative. Interestingly there are some arguments about whether FDI is really beneficial or not and how significant this benefit is to insurance business financial performance in Nigeria is largely unclear, it said.
