South African company, Momentum Metropolitan Holdings, has exited the Nigerian market by selling off its subsidiary in Nigeria as the National Insurance Commission (NAICOM) begin its shake-up process by downsizing the number of players in the Nigerian insurance market.
Momentum Metropolitan Holdings sold its 100% stake in Metropolitan Life Nigeria to Verod Capital Management, an investment firm based in Nigeria. This deal comes three years after Momentum Metropolitan acquired the 50% stake of United Bank for Africa to become majority stakeholder.
While it was stated that the exit of Momentum Metropolitan Holdings was due to its Reset and Grow strategy, there is also the recapitalization issue of NAICOM.
Why the sell-off? The acquisition occurred after NAICOM proposed an increment of the capital base for insurance firms. The regulator directed Life insurance underwriting firms to grow their capital base from N2 billion to N8 billion.
Before Momentum Metropolitan Holdings sold its shares, Metropolitan Life Nigeria accounted for about N2 billion capital base. Metropolitan Life Nigeria is a life insurance firm. Its full-year 2018 financial statement disclosed the company ended with N2.26 billion gross premium written from just N2 billion in 2017. The deal will enable Metropolitan Life Nigeria to meet the NAICOM requirement.
This is the second recapitalization process Metropolitan Life Nigeria will undergo, as the company had made a change of name from HEIRS Life Assurance Company Limited after a successful recapitalization about three years ago.
Mergers&Acquisition is expected to disrupt the insurance market’s status quo as the number of insurance companies have been projected to drop from 59 companies to about 25 just like the banking industry in 2004 after the Charles Soludo banking reform which positioned Nigerian banks on global competitive platform.
Why this is important: Mergers and Acquisitions of insurance companies is expected to strengthen the insurance market in Nigeria and accelerate its growth to make the sector as competitive as other countries.
Currently, the insurance penetration in Nigeria is 0.31% a rather extremely low rate compared to South Africa, India and other developing countries. But with this reorganization of the Nigerian insurance market, Coronation Research projects that insurance penetration in Nigeria could grow from 0.31% to 3.69% in 10-years.
What Verod see in such market? For Verod Capital Management, opportunities abound amidst slow growth of Nigeria’s insurance market, “Low levels of insurance penetration, even compared to other African economies, point to untapped opportunities within the sector,” Eric Idiahi a Partner at Verod said.
He added that NAICOM has taken necessary steps to create an enabling environment suited for the growth of the insurance market, “We believe that these actions, in addition to product innovation supported by increased public awareness and investments in technology-driven distribution channels, are the triggers that this sector needs to close the insurance penetration gap.” Idiahi concluded.
[READ ALSO: Here is why AG Leventis is delisting from NSE]
Note: Verod Capital Management own a “minority” stake in Greensprings, one of Nigeria’s leading private schools. The investment company also have a key stake in Cscs Plc.
Verod also has an interest in Niyya Farm Group Limited, a holding company of an agro-processing business, among many other businesses.
ValuAlliance Asset Management appoints two new Directors
ValuAlliance Asset Management has announced the appointment of two persons into its Board as Directors.
ValuAlliance Asset Management, the fund manager of the ValuAlliance Value Fund, has announced the appointment of Messrs Obinnia Abajue and Kofi Kwakwa into its Board as Directors.
This is according to a disclosure sent to the Nigerian Stock Exchange and seen by Nairametrics. In line with statutory requirements, the appointments are subject to confirmation from the Securities and Exchange Commission (SEC) and approval by the shareholders at the company’s next Annual General Meeting (AGM).
According to the notice, Mr Obinnia Abajue was appointed as Independent Non-Executive Director while Mr Kofi Kwakwa was appointed as Non-Executive Director. The profile of the aforementioned experts is succinctly captured below;
Mr Obinnia Abajue
Mr. Abajue has over two decades of experience in banking and financial services. He is the current Chief Executive Officer (CEO) of Hygeia HMO Limited, a position he has held since November 2016. He is an alumnus of the University of Lagos and Imperial College London, where he obtained a Bachelor’s degree in Actuarial Science and an MBA respectively. Mr Abajue is a fellow of numerous professional bodies like; The Chartered Institute of Management Accountants, UK; The Institute of Chartered Accountants of Nigeria; The Chartered Institute of Bankers of Nigeria and the Chartered Institute of Stockbrokers of Nigeria.
Mr. Kwakwa is a Ghanaian and a former CEO of Sagevest Holdings, an investment holding company in Ghana. He has over 25 years of experience in investment banking and consulting, having worked in top firms like Standard Bank, McKinsey & Company among others. He is currently a director at African Capital Alliance Limited (ACA), having joined the Board since 2015. Mr. Kwakwa is an alumnus of Swarthmore College and Harvard Business School, both in the USA, where he obtained a B.A. in Mathematics/Economics and an MBA respectively.
What they are saying
Commenting on the recent development, a part of the press release reads: ‘’The Board of Directors congratulates Mr. Abajue and Mr. Kwakwa on their appointment and is looking forward to tapping into their vast wealth of experience to further accelerate the achievement of its vision, to be the premier investment management fiduciary in the segments we serve.’’
What you should know
- ValuAlliance had earlier posted a Profit After Tax of N237.96 million in its last reported financial statements-Q3, 2020. The PAT figures indicated a surge by over 1,000% YoY.
- ValuAlliance Value Fund formerly known as “SIM Capital Alliance Value Fund”, is a closed-end collective investment scheme, registered and regulated by the Securities and Exchange Commission, whose units are listed on the main board of the Nigerian Stock Exchange (“NSE”).
Nigeria’s long road to metering: Who bears the brunt?
While consumers remain unmetered due to the inefficiencies of the Discos, the Discos continue to charge outrageous estimated bills.
One of the many challenges facing Nigeria’s electric power sector is the issue of metering. From being a pre-privatisation problem, lack of metering has evolved to be a more sophisticated post-privatisation feature skirting the corridors of the Nigerian power sector for the last few years.
Statistics show that the number of unmetered customers across Nigeria has continued to rise. In 2016, a metering status report from the Nigerian Electricity Regulatory Commission (NERC) showed that about 3 million of the registered accounts of customers were unmetered. In 2017, this number grew as NERC reported that over 4 million unmetered customers. In 2019, a NERC report showed that over 5 million Nigerians were unmetered and this number has continued to rise.
In a bid to address the metering gap, in 2013 at the onset of the privatised electricity sector, the Credit Advance Programme for Metering Implementation (CAPMI) scheme was launched. The purpose of the scheme was to relieve the Distribution Companies (Discos) of the burden of financing the cost of the meters. As such it enabled the customer to pay for the meter upfront while the Disco amortised the cost through electricity supplied to the customer over a period of time.
The CAPMI removed the initial capital outlay for financing meters from the Discos and Discos were to provide the customer with a meter within 45 days of payment. However, the scheme failed to deliver on its objective. As noted by the then Minister of Power, Works and Housing, Babatunde Fashola in 2016, “Discos that collected money from their customers to procure and install meters at their homes have mostly failed to do so”. The CAPMI was eventually discontinued in 2016, leaving the sector with at least a 50% metering gap.
In April 2018, the Meter Asset Provider (MAP) scheme was introduced by NERC in a bid to address the same problem. Under this scheme, there were to be third party meter suppliers engaged by the Discos, effectively removing the burden of providing meters from the Discos. The Discos were mandated to engage MAPs within 120 days.
The scheme, unlike the CAPMI, ensures that the customer received a meter from the MAP without making any upfront payment, while the payment was sculpted into the customer’s monthly electricity tariff as an energy charge until it was fully amortized. The scheme also gave customers the opportunity to choose to pay upfront and get their meters installed within 10 days in return for energy credits. It turned out that more customers were taking the alternative approach rather than the original approach as the rollout was not very favourable to those who chose to go the energy charge amortization route.
The MAP scheme has not been as successful as was hoped, with Discos missing deadlines to engage MAPs and MAPs facing the challenge of increased import tariffs and lack of local manufacturing capacity. In October last year, the Central Bank of Nigeria (CBN) launched its National Mass Metering Programme (NMMP) with a view to funding the local production, and in some, cases importation of meters by meter providers and Discos. Perhaps this was a case of putting the cart before the horse, since the facility came after the Federal Government had revised electricity tariffs upward of a 100%, not considering the fact that a teeming number of customers who had subscribed under either the CAPMI or the MAP scheme were yet to receive meters.
With the addition of the NMMP facility to CBN’s existing N213billion Nigerian Electricity Market Stabilisation Facility (NEMSF) advanced to the Discos in 2014, significant progress is yet to be seen from this facility gathering. While it is hoped that the NMMP will help close the metering gap, the brunt of the lack of metering since the privatisation of the sector has always been borne by the consumers, many of whom have had to pay exorbitant prices for meters under previous schemes, with nothing to show for it.
Interestingly, while consumers remain unmetered due to the inefficiencies of the Discos, the Discos continue to charge estimated bills even after the February 2020 NERC Order that capped estimated billing. While the Order may have merely reduced incidences of outrageous bills, Discos continue to bill customers outrageous amounts.
It is unfortunate that almost a decade after the privatisation of the Nigerian electricity sector, the Discos are unable to tackle one aspect of Aggregate Technical, Commercial and Collection (ATC&C) losses and continue to put the burden of metering or estimated billing on the customer, added to the increased electricity tariffs the customer has to pay in spite of epileptic power supply. NERC must really sit up in mandating compliance by the Discos in seeing that the NMMP combined with the MAP meet the December 2021 deadline of closing the metering gap.
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