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Opinion Editorials

Insurance as an Aids-to-Trade

Insurance is a support service to a business that helps it manage her risks. While, it helps the business to manage her risk, insurance also promises to bring the business back to the position it was if the risk insured crystallizes.

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Insurance

As a young secondary school student, I liked commerce as a subject. And amongst all the topics we were taught, “Trade and Aids to Trade” was my favourite. By definition, aids to trade are those auxiliary services that make it easy to carry out trade. These include but not limited to insurance, advertising, warehousing, transportation, and banking. These support services serve as leverage to business and help its competitiveness. Therefore, it will be difficult for a business entity to survive without them. They determine the survival of any business entity whether small, medium, or large scale.

Insurance is a support service to a business that helps it manage her risks. While, it helps the business to manage her risk, insurance also promises to bring the business back to the position it was if the risk insured crystallizes. However, this reimbursement happens only when the cause of the loss is an insured peril.

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How does insurance do this? It is structured in such a way that the insured knows in advance what his policy covers and what is excluded. This is expressly stated in a policy document that embodies the terms and conditions of the policy and is made in a readable format. In recent times, this is interpreted in languages that the insured understand to reduce ambiguity.

The insured is expected to not only read but understand the lines in the policy. The understanding of the policy document is especially useful when claims occur. This is because, when an insured understood the terms, conditions, warranties, and clauses in his policy document, lodging of claims and processing of the same become a lot easier. This is perhaps one of the challenges of many Nigerians. We are usually in a hurry and rarely read policy documents, such as terms and conditions for any product or service. The simplification of this process is a major challenge that the insurance industry needs to address in order to gain more trust from the public.

(READ MORE: Top 10 risks Nigerian businesses will face in 2020/2021 – Report )

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In Nigeria like any other country, businesses are vulnerable to catastrophic shocks ranging from fire to burglary, pecuniary to liability risk. A business entity could be enmeshed in unforeseen legal liability as a result of the usage of its products by the public. Unfortunately, these risks could bring about the end of the business entity if not properly managed; leading to other unforeseen circumstances such as trapping owners and employees to a poverty-vulnerability vicious cycle. The aim of insurance is to prevent this likelihood and/or restore hope if it happens.

Insurance as an Aids-to-trade

 

Despite the benefits businesses could reap through the insurance support services, many businesses still do not take advantage of insurance to protect their business. There are many insurance products that a business can buy to safeguard her from an imminent crash in a third world country like Nigeria. There are products like Fire and Special Perils, Fire Consequential Loss, Fidelity Guaranty, Money, Burglary, Group Personal Accident, Motor Vehicle Insurance, Public Liability, Product Liability, etc. Each of these products has its own unique features, covers, and exclusions. For example, while fire and special perils cover the business against actual conflagration and allied perils, the fire consequential loss provides cover to the business against the income the business would have earned over a period but for the fire incident that happened. Fidelity Guaranty covers the business against dishonesty and embezzlement by insured’s employees against the business and when there is a loss of money to armed robbers, money insurance will come to the rescue.

In recent times, many businesses in Nigeria have gone under following an unfortunate fire incident in most commercial centers of the country. While the happening of the fire incident may not be the fault of the business owner; the owner could be blamed for not taking steps to forestall the impact of the fire incident. However, it is has been proven that one of the reasons for the non-acceptance of insurance is because of the cynical attitude of many people. To them insurance can never work. Little do they know that insurance does work and provides a hedge against such an occurrence of risks.

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These cynics based their argument on the fact that it is impossible to pay a token to the insurance company and be indemnified or reinstated to the former position before the loss. While it may be correct to say Nigeria Insurance Industry has suffered from poor image arising from many years of poor handling of claims, litigations, and the likes, the narrative has changed drastically from the goodwill the industry is beginning to garner. The regulatory agency, the National Insurance Commission has continued to work assiduously to restore credibility in the industry. Today, claims are settled quickly and without stress to the insured. In fact, times certain vital claims substantiating documents are waived and the claim paid just to build business relationships and goodwill.

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(READ MORE: NSE, IFC to Host Virtual Seminar on the Impact of COVID-19 on Women in the Workplace)

Perhaps, an explanation of the concept of insurance will help for clarity. Insurance is the pooling of risk which depends on the game of large numbers. It uses the concept of using the resources of the fortunate many to indemnify the unfortunate few. A good business student will comprehend this concept and then added a little mathematics, forecasting, and understanding of past experience, all things being equal, the company will take care of her liability and still smile to the bank. This has been consistent over the years but a poor understanding of the dynamics of the market and other environmental factors have pushed perception to negative making understanding and appreciation of insurance policy very difficult.

Insurance, Genuine motor insurance drops by 41.8% in 3 years 

An insurance package can cover accidents like this

 

At this point, it is imperative to admonish the insurance practitioners to be a little more visible than it has been. People can only patronize the propositions they can relate with and values that resonant with them especially when it comes from trusted sources. The industry needs to make use of both traditional and modern means of advertising and communication to change the perception of insurance in the minds of Nigerians. The insurance industry needs to take advantage of Information and Communication Technology (ICT) to create, engage, and relate more to the public. More so, there is a need for them to launch a campaign that will bring to the fore the amount and number of claims the industry pays per time. This could be done through publications by the industry trade organization, the Nigeria Insurers Association.

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Having said the above, it is important to mention that the benefits accruable to businesses from insurance support services cannot be overemphasized. It is my firm belief that a business that aims to be in perpetual existence will find the insurance cover a worthy partner. While this article targets mainly business entities, it is equally valuable to individuals. Therefore, let us as individuals and businesses buy insurance for sustainable living and peace of mind.


Chukwu Oteh is a Chartered Insurance practitioner based in Lagos. He can be reached on 0807 838 8333

Nairametrics frequently publishes articles from experts such as financial analysts, economists, researchers and investors. We also feature articles from guest writers and bloggers who wish to push their views and opinions through our platform. To get your articles on Nairametrics, kindly send an email to info@nairametrics.com and we will publish it within 24 hours of approval by our editorial team.

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Opinion Editorials

Why Standard Chartered App will always be your friend

Standard Chartered bank App is one of the most secure and user-friendly platforms for transactions and is highly equipped

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Why Standard Chartered App will always be your friend

When mobile banking Apps started ushering in just over a decade ago, they were more used as convenient tools to check and monitor account balances. Today, with customers being increasingly accustomed to innovative mobile technologies, expectations are higher than mobile banking Apps will provide a more fully-rounded experience.

Today, the rapid growth and widespread use of information technology is touching every part of human life and as technology begins to settle in, banking has become more seamless and easy. Banks are beginning to strategically decongest their banking halls and encourage the use of mobile apps for transactions.

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As one of the leading banks in Nigeria, The Standard Chartered bank App is one of the most secure and user-friendly platforms for transactions and is highly equipped with additional cutting-edge capabilities to enhance the customer experience.

The App delivers easier, faster, and more convenient solutions to streamline and make financial transactions very exciting. It is not surprising that Standard Chartered currently has one of the best mobile banking apps in the country and despite its successes in this regard, the bank continues to innovate in efforts to guarantee a future of secure, fast, and convenient banking for all.

The Standard Chartered APP has made things easier for innumerable customers across the country. Irrespective of a user’s location, you can perform the most important financial operations on the go. Everything from checking account statements to paying utility bills and transferring funds can be done online with the mobile banking application.

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The App is secure, very simple to use, and allows you to perform transactions and manage your bank account(s) from your mobile device. Some of the banking activities that can be done with the App include:

(READ MORE: Standard Chartered: Easy banking at no cost)

  • Viewing the account balance and transaction history.
  • Initiating bank transfer from your account to other Standard Chartered accounts and other bank accounts.
  • Paying bills and purchase airtime and data bundles for all mobile telecommunication networks in the country.
  • Request a credit/Visa Gold Debit card directly from the App and it will be delivered to your mailing address anywhere in Nigeria at a zero cost
  • Service requests directly on the app that eliminates almost the need to go to the branch. For example, fixed deposit, choose PIN and active your debit/credit card, request letters, confirm cheques, etc can all be done on the app

 

Why Standard Chartered App will always be your friend

With a stunning user interface and attractive appearance, the Standard Chartered mobile banking app ensures swift and quick banking operations. It is extremely easy-to-use, interactive, and intuitive with an attractive UI and simple functionality that makes financial transactions a cakewalk.

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Focus on the customer journey

The page layout, content display, and task flow are top-notch, to begin with. Like B. J. Fogg’s Behavioral Model suggests, it is important that a user is motivated to use the app. All the immediate call-to-actions are well placed and help users take the desired actions and detailed information.

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No information overload

Serious thought was put behind understanding and thinking of the Customers who are going to use the App with absolutely no overload of information. The Standard Chartered App is clean with a simple interface that focuses on what the user is really trying to do.

 

 

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Coronavirus

Rethinking Inclusive Education: COVID-19 realities, post implications on education

Prior to the pandemic, there have been efforts geared towards addressing educational inequity and ensuring that children everywhere are learning. One of such is the Inclusive education program.

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COVID-19, Education

Throughout history, we have seen that for every event that affects our lives, there are several unintended consequences. Over the past months, the world has grappled with the impact of COVID-19. Primarily a health-related issue, its impact is far-reaching and one area which has been significantly affected is education. All over the world, schools have been forced to close, and Nigeria is not left out.

The Realities We Find in Nigeria 

Prior to the pandemic, there have been efforts geared towards addressing educational inequity and ensuring that children everywhere are learning. One of such is the Inclusive education program.

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Inclusive education, as identified by Inclusive education Canada, is about ensuring access to quality education for all students by effectively meeting their diverse needs in a responsive way. It is about how we develop and design our schools, classrooms, and programs so that all students can learn and participate.

But can we estimate how much the COVID-19 pandemic has affected education? Are the estimated 46 million students forced to stay at home in Nigeria still learning? With the uncertainty regarding how long the shutdown will last, there have been several interventions to ensure that students are still learning.

In line with global trends, highbrow private schools in the country have adopted a virtual learning model. However, a significant number of students in the Nigerian educational system are found in public schools.

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For this category of learners, what happens to them? Also, some state governments have introduced television and radio learning but one can observe that almost 70% of states in the country have done nothing to meet the learning needs of these students. Again, we see education take a back seat.

(READ MORE: Emefiele insists CBN will not sell forex for importation of items produced in Nigeria)

Furthermore, in a country like Nigeria with an epileptic power situation, another reality hits. Do all homes have access to electricity to view television programs and how many homes have access to a television? This is vital as approximately 44% of our population is living in extreme poverty, according to the latest report by the National Bureau of Statistics (NBS).

As a teacher in a public primary school in Kaduna, Muktar is faced with this reality. Among the 154 students in his class, 40% of them lack access to either a television or radio while 55% lack access to a consistent power supply. This means that the chances of more than half of his students not accessing any of the educational programs is very high. How do they learn during this pandemic?

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Whilst we agree that radio is a good fit for reaching a wide audience, the question is, how many subjects can be effectively taught over the radio? In responding to this, we need to remember the learning styles of students, the time it takes to understand what is being transmitted, and their different learning environments.

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Would Sule in Minna have the same learning experience as Hajara in Osogbo? One thing we can be certain of is, as it stands, the educational inequity gap would be further widened post-COVID-19.

In attaining inclusive education, nutrition plays a crucial part. Fundamentally, the homegrown school feeding program was introduced to meet this need. However, with the absence of school meals, a lot of students nationwide, even with access to learning opportunities, may be learning with little or no food intake thereby impeding the learning process.

It is also becoming clearer that we cannot completely tech our way out of the current situation. Although technology plays a huge role, we need to start addressing the fundamental issues in our society- one of which is the quality of teachers in the system. Can the existing teachers run a fully functional education technology system?

Also, what infrastructure can be put in place to cater to all students in the system irrespective of location? As an offshoot of the above, another reality still remains that the rate of internet penetration is not evenly spread across the country and the cost of data is still relatively high.

(READ MORE: US supports Nigeria with $32.8 million for COVID-19, over $5billion on health in 20 years)

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Going Forward 

It has become obvious that going forward, there will be a call to re-evaluate our educational system to truly achieve inclusive education. In doing this, there is no one size fits all strategy. However, the first step in proffering any solution is to know the people for whom the solution is meant. It is high time we had real data about the diverse population in the country. We need to understand the different types of learners in the country, where they are, and their learning needs.

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Also, our learning methodology needs to be revisited. Our institutions and methodologies are being tested; it can no longer be business as usual. We need to act and the time to start acting is now. We need to start putting the right infrastructure and personnel in place in our educational system.

In conclusion, these words from Bill Gates summarises all we have said; the disease is both a symptom and cause of inequity. Today, it is COVID-19; tomorrow, it could be another pandemic. But in all, they are all fuelling the inequity gap.


This article was written by Godwin Henry and Muktar Agbadi.

Godwin Henry  is an Alumnus (2017 Cohort) of Teach For Nigeria, and Muktar Agbadi is a 2018 Teach For Nigeria fellow currently serving in Kaduna State

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Coronavirus

Efficient Power: Addressing a Critical Element in Nigeria’s Agro-Industrial Revolution

Agriculture sector is back in the spotlight as a viable foundation for sustainable and inclusive growth for Africa’s largest economy and most populated country.

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Agritech, Efficient Power: Addressing a Critical Element in Nigeria’s Agro-Industrial Revolution

As Nigeria’s government comes to grips with the economic slowdown that has followed the global spread of the novel Coronavirus, known as Covid-19, the agriculture sector is back in the spotlight as a viable foundation for sustainable and inclusive growth for Africa’s largest economy and most populated country.

However, to truly harvest the potential of the country, most observers agree that large scale agribusinesses and agro-processing must be an integral part of the government’s economic policy. Energizing that growth is a responsibility that public and private sector players must embrace. Given the unreliable supply of electricity from the grid, independent power projects (IPPs) are a viable alternative source of energy for the operations of agro-allied industries.

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The prospect of agribusinesses getting reliable power from the grid remains dim in the short term. It will take strong political will and significant private capital to fix several problems across the power value chain. Even if the public and private sector show such commitments, the required investments in generation, transmission and distribution infrastructure could take years to complete for industrial users to feel comfortable adopting the grid as a power source.

READ MORE: AfCFTA delay: A bane to Africa’s $3.4 trillion economic bloc

Supplying Energy Efficiently

This challenge presents an opportunity, and, in typical Nigerian fashion, some entrepreneurs are awake to the opportunity. Fenchurch Power, an infrastructure development company with operations across Nigeria is one such example. Following its successful capital raise, the firm aims to add 150 megawatts of IPP capacity to the country over the next 5 years to power a range of industries, including the agriculture sector. There is a huge opportunity in the supply of energy to power agro-allied and manufacturing industries in Nigeria. For these players to compete locally and in the international market, they must not only provide the energy to fuel agro-allied operations, but they must also do so in the most efficient way possible.

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Unrealized Potential

Agriculture remains the mainstay of the Nigerian economy, providing the main source of livelihood for most Nigerians. With over 80 million hectares of arable land and a population of over 200 million people, the potential for business success is huge. However, the sector faces many challenges, notably an outdated land tenure system that constrains access to land, a very low level of irrigation development, limited application of research and new technologies, and the inefficient distribution and high cost of farm inputs. Other constraints to the growth of investment in the sector are poor access to credit, ineffective procurement and distribution of inputs, inadequate storage facilities and poor access to markets.

READ MORE: Manufacturers, construction companies to receive waivers from Lagos State during lockdown ease-up phase

As a result, according to the National Bureau of Statistics, the value of agricultural goods imported into the country have risen steadily over the last 4 years to N959 billion in 2019 while exports have declined over the same period to N269 billion. Notably, exports are also almost exclusively made up of raw materials, denying the country of the higher revenues that come with adding value to raw agricultural products.

As part of its programme to catalyse the growth of the agricultural sector, the federal government has announced plans to establish special agro-industrial processing zones (SAPZ) in collaboration with the African Development Bank. Given the infrastructure and other incentives that such zones will offer agribusinesses, they have the potential to support the growth and emergence of export-oriented agribusinesses.

Grid Supply Void

IPPs are a logical solution to addressing the current challenges that prevent industrial users from adopting distribution companies as a reliable source of electricity. Several factors across the power value chain prevent distribution companies from becoming reliable suppliers to industrial users. A case can be made for the distribution companies to have power at the medium voltage end of the value chain. This helps to eliminate some of the technical and commercial losses experienced and allows the discos to receive more power into their network to feed industries. According to a recent Price Waterhouse Coopers report, only a fraction of power generated ends up with industries. This clearly shows a significant gap that must be filled. There should also be more partnerships between independent power plant developers and the distribution companies. These partnerships will significantly increase the revenue profiles of both parties and reduce the size of the alternate market for generators. Greater integration between the gas suppliers and the power generating business is also an important dynamic that will evolve from the increased usage of IPP solutions.

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READ MORE: A trip to Sura Market reveals the good and bad of its Independent Power Project

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Powering Large Scale Agro-Investments

In the meantime, large scale agro companies such as Flour Mills, Olam, Honeywell Group and the Dangote Group, have invested billions of naira in a wide range of projects across the country. Many of these investments are unlikely to be within the proposed SAPZs. These companies, therefore, have to make the most of the opportunity where they are cited. An important part of that effort is to be an efficient producer.

Due to the unreliable energy from the national grid, these companies have invariably invested in alternative power projects to support their operations. However, the development and operations of these power assets is not the core business of these large scale agro companies and is, therefore, inefficient use of capital that could fund the expansion of their core businesses. They are best suited to focus on increasing production, quality control and business development.

While electricity is a vital resource for agribusinesses, investing in power generation projects is inefficient for several reasons. First, the investment is a distraction from their core business. In addition to managing often problematic production value chains, agribusinesses bear the burden of running power generating plants and the responsibilities associated with the staffing and maintenance of these facilities. Second, because these companies are focused on generating reliable power for their operations, they are unable to optimize the value of the power generating assets.

READ MORE: Reps to probe FG’s N3.4 billion failed solar power project

Case of Telco Style Efficiency

In the search for a more efficient model, the mobile telecom industry presents an example of a sector that has embraced the concept of outsourcing to achieve greater efficiency. After the Nigerian government-issued licences to mobile telecom operators in 2001, an essential part of the investment required to achieve national coverage was the construction of cell towers. A decade later, most telcos have shied away from investing in cell towers and have embraced the idea of selling these assets to third party companies such as Helios Towers and IHS that are better equipped to optimize the value of these assets.

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Retooling Energy for Agribusiness

There are several options for agribusinesses seeking a path to greater energy efficiency. By partnering with the host state governments, distribution companies, and large corporations, power infrastructure companies can execute customized power purchase agreements (PPAs) that will underpin independent power projects for specific industries. Furthermore, where such contracts exist, power infrastructure companies with greater capacity are willing to purchase the underlying power assets from providers with constraints to meeting the terms of their contracts. They can also purchase power assets from agribusinesses and then execute a PPA which will guaranty the supply of electricity to the firm. A key to delivering power efficiently to multiple users is having a business model that is built to do exactly that. Properly structured power infrastructure companies are able to accommodate a variety of scenarios and deliver solutions that optimize the peculiar conditions that confront agribusinesses.

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Covid-19 Wake Up-Call

The full or partial lockdowns and the associated decline in demand for goods and services that have followed the outbreak of Covid-19 in Nigeria present a significant challenge for businesses operating in Nigeria. A key to wading through the difficult times is to innovate in ways that not only expand the markets for producers with a view to boosting revenues but also reconfigure the cost base for operations. Outsourcing electric power supply presents one way to improve the operational efficiency of agribusinesses going forward. Power infrastructure firms such as Fenchurch Power are strategically positioned to revolutionise how players achieve much-needed efficiency.


This article was written by Funso Adeyemi. Adeyemi is the COO of Fenchurch Group, an Africa-focused Energy, Power, and Infrastructure conglomerate driven by the passion to bridge the energy gap of Africa.

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