Nigeria’s insurance sector regulator, the National Insurance Commission (NAICOM), has increased the minimum paid-up share capital of insurance and reinsurance firms. The move though expected, sent shock waves around the insurance sector of Nigeria.
Breakdown: In a circular made available to insurance firms, NAICOM disclosed that under the new capital regime;
- life insurance underwriting firms, which currently have a minimum paid up share capital of N2 billion, will compulsorily shore up their capital to N8 billion, representing a 200 percent increase.
- By the new paid-up share capital regime, Insurance firms underwriting general business have been mandated to shore up their capital from N3 billion to N10 billion.
- Composite insurance firms, that is, firms underwriting both life and general business will raise their capital from the current N5 billion level to N18 billion.
- Reinsurance firms will move up from the current minimum capital of N10 billion to N20 billion.
Effective date: In the circular signed by Pius Agboola, Director, Policy and Regulation Directorate for Commissioner for Insurance, NAICOM disclosed that the new minimum paid-up share capital requirements shall take effect from the commencement date of the circular for new applications, while existing insurance and reinsurance companies shall be required to fully comply not later than June 30, 2020.
NAICOM stated, “The provision in respect of the requirement of statutory deposit as stipulated in part III, section 10 of the insurance Act 2003 shall apply on the effective date of commencement of this circular”
It was looming: Nairametrics had in April 2019, reported a possible increase in the capital base of insurance firms to about N15 billion. According to industry sources, NAICOM was to mandate insurance firms to recapitalise or merge in order to meet the new capital requirement.
Major U-turn: Last July, Naicom announced an increase in the capital base of Insurance Companies but suspended it. At the time it introduced a tier system where Life insurance firms were supposed to have three capitalization tiers. Tier one companies were required to have N6 billion as capital. Tier two life insurance firms N3 billion, while tier 3 firms were to remain at N2 billion.
Non-life insurance firms on the other hand also had three tiers. Tier one non-life firms are mandated to have a capital base of N9 billion. Tier two firms in this segment were expected to have a capital base of N4.5 billion, while tier 3 firms maintained the current capital base of N3 billion. This time around the regulator has decided to go without a Tier.
What this means: Insurance companies in Nigeria are now faced with an imminent race to raise capital. There is going to be a flurry of right issues, public offers, and even IPOs in the coming weeks. Just like it happened to banks in the Soludo era, most insurance firms will have to consider mergers and acquisitions to meet the capital requirements.
Bad timing: NAICOM is perhaps the winner in all of this as it finally gets to fix the insurance sector’s capitalization problem. However, this policy could not have come at the worst times for Insurance firms. There is a paucity of investors in the capital market with most focussed on buying MTN shares. Foreign investors that have for years been hoping to acquire insurance firms on the cheap in Nigeria may have a window of opportunity to do so. Most insurance firms will be willing to get bought out or partially acquired.
Who will benefit: FInancial advisory firms, private equity companies, stockbrokers, stock exchange, banks, accountants, lawyers are poised to earn huge fees from the spate of deals that will be consummated between now and June 30th, 2020.
What next: Insurance companies will have to consider complying with the rules or once again lobby the regulators to postpone the effective date of June 30, 2020. NAICOM suspended this requirement last year when it first issued it and could do so again if pressure is from the “top.” For now, the focus of all insurance firms in Nigeria will be geared towards raising capital.
About NAICOM: The National Insurance Commission was established by the National Insurance Commission Act No 1 of 1997 to ensure the effective administration, supervision and regulation of insurance business in Nigeria as well as regulate transactions between insurers and reinsurers within and outside Nigeria.
Why the proposed Borno power plant may not materialise
The glaring security challenge cannot be overlooked in considering a major power plant project in Borno State.
Only a few days ago, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, led a delegation to Borno State to meet with the Governor of the State, Babagana Zulum.
In the conversation with Zulum, Kyari promised the establishment of a gas-fired power plant in Borno State within a maximum of 4 months to solve the recent blackouts that resulted from insurgents cutting off Borno from the national grid since January this year.
In Kyari’s words, “We have talked to each other and we think it’s very possible to establish a dedicated power plant in Maiduguri which will serve current needs of power supply not only in Maiduguri but to other parts of the neighbouring cities.”
Yet, there is a significant possibility that the power plant promised by Kyari may not materialize for many reasons, the first of which is security. In the meeting with Kyari, Governor Zulum had noted: “The ongoing insurgency has cut off the entire Borno from the national grid in the last three months. We put all our efforts and restored it back… but unfortunately, after 48 hours, the same group of insurgents went back and destroyed the main tower again.”
This glaring security challenge cannot be overlooked in considering a major power plant project in Borno State, particularly noting that the State and its surrounding communities have been the hot zone of insurgent and terrorist attacks by Boko Haram insurgents since 2009. Borno, Yobe and Adamawa have particularly been states where the insurgents have set up shop and carried out various activities, including kidnap, extermination of entire communities, burning of markets and religious buildings and the attack on the United Nations compound, in each case claiming tens or hundreds of innocent lives.
One report reveals that at least 37, 500 people have been killed by the insurgent group since May 2011, a modest number, some say. Also, till date, some of the secondary school girls kidnapped in the April 2014 Chibok incident are yet to be returned to their families. It is then bewildering how Kyari intends to see to the construction and operationalizing of this gas power plant.
Additionally, while the Minister of Petroleum for State, Chief Timipre Sylva, announced last year about the discovery of oil and gas deposits in the North, we have not seen any exploration and production kick-off. It then begs the question of where the gas for the Borno power plant intends to be sourced. The only gas pipeline that runs through the North – the AKK- is still in its first phase of construction out of three phases and has been earmarked at the earliest, to be completed in 2023 – not counting the typical delays the project will experience along the way.
Should the AKK by some stroke of luck materialize much earlier than the target date, the pipeline route is a considerable distance from Borno. It runs the route of Ajaokuta-Abuja-Katsina-Kano, its endpoint, a striking 481km from Borno State. Thus, there would have to be construction of a tie-in pipeline almost as long as the AKK from Kano to Borno State to get gas to Borno.
Optimists may reference the oil and gas discovery in the North and how production may start soon, thus obliterating the need for a 481km pipeline. This optimism however is not well-founded, as insecurity has been shown to be a major risk to oil and gas projects everywhere in the world. One of the major reasons the Trans-Saharan Gas Pipeline proposed to run from Nigeria to Algeria was abandoned was due to security challenges posed by Nigeria’s Movement for the Emancipation of the Niger Delta (MEND), the Tuareg guerilla movement in Niger and other insurgent groups along the proposed route of the pipeline.
These increased the risks across board, including for completion and operations through the lifecycle of the project. As such, failing to fix the security threats in northeast Nigeria makes any proposed gas plant project a pipe dream. Transporting gas via LNG trucks is not a better option, given that the drivers and their cargoes would be in danger of being kidnapped, shot at or bombed. The risks for both personnel and investors are high.
In any event, promising a power plant in 4 months for the people of Borno is unconscionable, since a typical gas power plant will take between 1 to 6 years to construct in relatively peaceful regions. What the government needs to do instead of making promises it cannot keep is to work arduously to fix the security challenges in Northern Nigeria and at the same time consider using decentralised solar power to provide power supply to homes, government institutions, schools and businesses while plans to produce gas in the region or transport gas to it are underway.
Lagos Commissioner of Police dismantles road blocks on Lagos-Badagry expressway
The Commissioner warned the concerned Area Commanders to take action on full compliance as any defaulter will be sanctioned accordingly.
The Commissioner of Police in Lagos State, CP Hakeem Odumosu, has ordered the immediate dismantling of all illegal roadblocks by police teams from the command on the Lagos-Badagry expressway.
The directive is to checkmate the illegal activities of the police on that route which have been condemned by the government, some stakeholders and international bodies and also bring sanity and decency to their operations along that axis.
That disclosure is contained in a statement signed by the Police Public Relations Officer of the Lagos State Police Command, CSP Olumuyiwa Adejobi, on Saturday, April 10, 2021.
Adejobi in the statement said that CP Odumosu gave the order on Friday while addressing Area Commanders and Divisional Police Officers in the command on the general security situation in the state and reviewing the anti-crime strategies of the command in order to sustain its feats on crime control.
What the statement from the Lagos State Police Command is saying
The statement from the Lagos Police Command partly reads, “In his bid to restore sanity and decency to the operations of the police along the ever-busy international route, Lagos/Badargy Expressway, the Commissioner of Police, Lagos State, CP Hakeem Odumosu, has ordered for the immediate dismantling of illegal roadblocks by the police teams from the Lagos State Police Command.
The police boss, while reacting to some complaints from the general public and some security reports on the police activities along the international route, ordered the Area Commanders and Divisional Police Officers whose jurisdictions fall along the Badargy Expressway; Festac and Area K, Marogbo, to withdraw their men from the illegal roadblocks and embark on aggressive motorised patrol and surveillance to police their areas and the route.
The Commissioner of Police confirmed that the illegal police roadblocks along the route have been condemned by the government, international bodies and interest groups and they must be dismantled without delay,” he said.
The Commissioner, however, noted that other police operatives from other police formations, outside the supervision of the Lagos State Police Command who operate along the route, would be contacted to adjust and do the needful to restore sanity to their operations.
The CP Odumosu then warned the concerned Area Commanders to desist and take necessary action on full compliance with his order as any defaulter will be sanctioned accordingly.
REF NO. CZ: 5650/LS/PPRO/VOL.3/85
LAGOS CP DISMANTLES ILLEGAL ROAD BLOCKS ON BADAGRY EXPRESSWAY
*Threatens to Sanction Defaulters*
In his bid to restore sanity and decency to the operations of the police along the ever-busy international route, Lagos/Badargy
— Lagos State Police Command (@LagosPoliceng) April 10, 2021
Nairametrics | Company Earnings
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- Cornerstone Insurance Plc notifies stakeholders of late submission of financial statements.
- NSE approves delisting of 11 Plc shares.
- Berger Paints Nigeria Plc reports a 67% decline in Profits in FY 2020.
- MTN Nigeria raises N73.5 billion from CP Issuance to finance operations.
- Jaiz Bank proposes dividend worth N884 million for shareholders.