Business News
Insurance firms are reportedly selling off assets to meet NAICOM’s recapitalisation deadline
Some insurance firms in Nigeria have reportedly resorted to selling off their real estate assets, as the new recapitalisation deadline set by NAICOM draws nearer.
Some insurance firms in Nigeria have reportedly resorted to selling off their real estate assets, as the new December 2020 recapitalisation deadline set by the National Insurance Commission (NAICOM) draws nearer.
As Nairametrics earlier reported, NAICOM is requiring that all the insurance companies offering Life, Non-Life, Composite and reinsurance packages, must increase their capital base from N2 billion, N3 billion, N5 billion and N10 billion to N8 billion, N10 billion, N18 billion and N20 billion, respectively.
As expected, the development threw a lot of insurance companies into a frenzy, with many scampering to meet the deadline. Some have even resorted to raise capital through rights issues and commercial paper issuances.
And now, other insurance operatoes are exploring selling off their real estate properties in order to shore up capital and fulfil the financial requirement.
It should be noted that NAICOM is not recognising real estate properties as capital in the recapitalisation process. This is why these insurance companies are having to sell off their properties in order to raise cash.
[READ MORE: NAICOM set to support firms unable to meet recap plan)
Unfortunately, they are facing some challenges in this regard. According to Daily Sun, saturation in the Nigerian real estate sector is making it difficult for some of the insurance companies to find potential buyers for their properties. Some of these insurance companies are AXA Mansard and Niger Insurance.
On the other hand, the Chief Executive Officer of Cornerstone Insurance Plc, Ganiyu Musa, disclosed that for a long time, his company resisted the idea of selling off its landed properties until it had no choice but to. According to him, the company has been able to realise billions of naira from the sale of some of its real estate assets. He said:
“Of course, our original intention was to hold it for the long term but shortly after we completed it, NAICOM then came up with the recapitalisation programme and unfortunately, one of the provisions of the exercise is that investments in properties would not be allowed as admissible asset.
READ MORE: AMCON possesses APC’s chieftain’s assets over N1 billion debt
“So, we are now in a situation where we have invested about N4 billion of our funds and the regulator is saying, ‘Oh sorry! This N4 billion will not count.’ We took the big decision to sell the property which we did at a very handsome price.
“And just in one fell swoop, it resolved many issues. We now have a significant amount of liquidity, we do not have the headache of recapitalisation and we have done what the regulator wants, which is to convert any property to cash.”
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Business News
Cost of building materials rise by over 60% in one year
The price of building materials in the market experienced a rise of over 60% in the last one year.
The cost of Cement, Steel, Tiles and Plaster of Paris (PoP) cement, among others have risen by over 60% between March 2020 and March 2021.
For instance, the cost of steel, which was sold at N234,000 per tonne as of March 2020, had increased to N380,000 at the end of March 2021. This represents a 62% increase within the period under review.
While Dangote Cement increased from N2,600 to N3,800 (though it is sold at N3,600 in some areas in Lagos), Lafarge Cement and BUA Cement increased from N2,400 and N2,250 to N3,600 and N3,250 respectively within the same period.
The price hikes are not limited to the cost of steel and cement alone but also to other materials like Tiles, PoP cement, and roofing sheets.
The cost of super white cement increased from N2,500 (25kg) to N3,700, and the cost of high-quality white cement (40kg) also increased from N4,000 to N6,500.
The cost of gravel increased from N80,000 to N140,000; that of 8mm diameter and 25mm diameter (imported) increased from N234,000 and N245,000 to N330,000 and N380,000 respectively.
Doors are not left out in the hike. Costs of Flush door (high quality), Panel door and Turkish steel door (1,500 x 2,100) also rose from N35,000, N40,000, N165,000 to N60,000, N75,000 and N235,000 respectively.
Why the hike?
Industry experts have attributed the hike to persistent depreciation of the naira and the rising cost of other building materials.
Tunde Oluwole, a fellow of the Nigerian Institute of Builders, explained that the development was caused by high interest rate, inflation, increasing exchange rate and scarcity of forex in the country.
He said, “The increasing prices in Nigeria is a result of the combined effects of high-interest rates, devaluation of the naira, inflation, and non-effective distribution network of the materials.”
To Kolawole Adebisi, an Estate Developer, the development in the cement industry is caused by the ban of imported cement in the country.
He told Nairametrics that he is not against the ban, as the government’s intention is to boost local production of cement but explained that “the local manufacturers were unable to produce enough cement to meet the demand and this contributed to the rising cost of the product.”
