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Financial Services

Here’s what will happen to Nigeria’s insurance sector in the short to medium term

The Nigerian insurance sector is expected to grow at a subdued rate in 2020 due to the COVID-19 pandemic.

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Nigeria's Insurance Sector

The Nigerian insurance sector is expected to witness considerable growth in the medium to long term, despite an interruption in 2020 due to the COVID-19 pandemic.

In specific terms, players in the smaller life insurance segment of the market are expected to grow their collective premiums by 4.8% to N179.81 billion in 2020. This is a downwardly revised forecast due to the country’s weakened economic condition. Meanwhile, the life insurance segment is expected to grow its premiums to as much as N207.96 billion by 2024.

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On the other hand, the non-life insurance segment of the market (which is significantly larger), is projected to grow its premiums by a revised 2.9% to N248.85 billion in 2020. In the medium term, growth in the non-life segment is expected to reach N321.53 billion in 2024.

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Nigeria's insurance sector

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It should, however, be noted that these projected growths are not going to come about easily, mainly due to Nigerians’ general lack of enthusiasm for insurance. According to Fitch Solutions, premiums growth will continue to be limited due to expected low average earnings by the insurance firms.

Widespread poverty was identified as a major factor making it impossible for a lot of Nigerians to access insurance covers. But then again, some wealthy Nigerian are known to avoid spending on insurance covers. This general lack of enthusiasm is known to hamper growth in the Nigerian insurance sector. The report, therefore, called for more action to be taken towards educating Nigerians about the importance/benefits of both life and non-life insurance.

READ MORE: Lagoon and Blue Ocean narratives of Nigerian Insurance sector – Report 

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“With a market supported by the country’s steady economy and large population, Nigeria’s insurance sector will enjoy a period of growth and development over the medium and long term, albeit interrupted by a slower pace of growth in 2020 due to the effects of the coronavirus pandemic. The outlook for premiums growth, however, continues to be limited due to low average earnings and widespread poverty, which will weigh on insurance affordability. As even the more affluent middle-class consumers tend to avoid purchasing insurance, which hampers the growth of compulsory basic insurance lines such as motor vehicle insurance, Nigeria’s potential consumer base needs to be educated more about the benefits of both life and non-life insurance coverage to support more robust growth in the sector.

“In spite of Nigeria’s large population, only a small proportion purchases life insurance. Life premiums currently account for 41.9% of overall insurance spending in the country. Low incomes and a lack of understanding of the benefits of life insurance remain the most important obstacles facing life insurers. However, a recovering economy, coupled with rising employment and incomes, will drive demand for life insurance products over the forecast period,” part of the report said.

In view of the competitive and regulatory landscapes, Fitch Solutions noted that the insurance sector in Nigeria is replete with mostly small players. The highly fragmented nature of the market makes it very competitive, even though only a few really command a greater percentage of the market share. In total, there are approximately 57 insurance companies in Nigeria and the report forecasted that the number may shrink in the coming years due to possible mergers/acquisitions.

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Note that the National Insurance Commission, NAICOM, had recently revised its capital requirements for various segments of players in the insurance. You may keep up with that development by clicking here.

In the meantime, foreign players have been showing serious interest in the Nigerian insurance sector. A typical example is the French insurance firm – AXA which has stakes in Nigeria’s  AXA Mansard Insurance Plc. Other examples are South Africa’s Old Mutual Ltd and Sanlam Emerging Markets (Proprietary) Ltd. As Nairametrics reported, Sanlam recently took over full ownership of FBN Insurance Ltd after FBN Holdings Plc divested all its stakes in the insurance firm which used to be one of its many subsidiaries.

Patricia

Emmanuel covers the financial services sector for Nairametrics. Do you have a scoop for him? Well then, contact him via his email- [email protected]

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Financial Services

African Development Bank to launch African Economic Outlook 2020 Supplement

The African Economic Outlook 2020 Supplement would be launched on Tuesday, July 7 through a live Zoom event.

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African Development Bank to launch African Economic Outlook 2020 Supplement

The African Development Bank (AfDB) announced on Tuesday that it will launch its African Economic Outlook 2020 Supplement on Tuesday, July 7 through a live Zoom event holding from 13:30 to 15:00 (Nigerian time).

The coronavirus pandemic has severely affected the economic outlook of African economies and made disruptions to the earlier reported growth projections like the AfDB’s 2020 African Economic Outlook reported in January.

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READ ALSO: COVID-19 Intervention Fund: CBN disburses N107.45 billion to successful beneficiaries

“The supplement revises the growth projections and outlook for Africa for 2020 and 2021 and highlights the impact of Covid-19 on Africa’s socioeconomic landscape. It recommends workable policy responses to safely reopen economies and accelerate growth recovery,” the bank said.

AfDB says that the supplement will be the first-ever published in the Bank’s 19-year history of the African Economic Outlook.

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It will be presented by Dr. Hanan Morsy, AfDB’s Director of Macroeconomic Policy, forecasting and research, and a panel made up of private sector practitioners and senior policymakers will discuss it.

READ MORE: Ecobank Transnational CEO warns that debt cancellation will hurt African countries

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The African Economic Outlook is the Bank’s flagship tool for policy dialogue, economic intelligence, and operational effectiveness, widely read by policymakers, investors, academics and many others.

 

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Financial Services

Fidelity Bank announces closed period ahead of H2 financial statements release

Fidelity Bank Plc is expected to release its half-year 2020 financial statement on or before August 29, 2020.

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Fidelity Bank Plc

Fidelity Bank Plc announced earlier today (Wednesday, July 1st, 2020) that it has commenced the preparation of its half-year 2020 financial statements.

A statement sent by the bank to the Nigerian Stock Exchange (NSE), said the financial statements would be sent to the Central Bank of Nigeria for approval, once the audit process is completed.  All things being equal, Fidelity Bank’s H2 2020 financial statements will be made available to the public by August 29 this year.

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In the meantime, the tier-2 bank said it shall observe a close period from today until twenty-four hours after the H2 financial statement is eventually released. The implication of this closed period is that all persons with insider knowledge of the company’s affairs shall be prohibited from trading the company’s shares. Part of the statement by the company said:

“Upon completion of the audit, the Audited Financial Statements shall be presented to the Central Bank of Nigeria for approval and thereafter, published in compliance with the provisions of the Nigerian Stock Exchange Rule Book and other relevant statutes and/or regulations. The Bank expects to publish its Audited Financial Statements for the Half Year ended June 30, 2020, on or before August 29, 2020.

READ MORE: Banks’ loans to customers rise to N18.9 trillion in Q1 2020

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“In addition, the trading window for dealings on the Bank’s shares shall be closed to all insiders from July 1, 2020, until 24 hours after the release of the Bank’s audited Financial Statements for the Half Year ended June 30, 2020.”

Recall that Fidelity Bank Plc released its Q1 financial statement back in April this year which showed gross earnings at N51.1 billion compared to N48.4 billion in Q1 2019. Overall, both Profit before tax and profit after tax declined by 1% y/y to N6.6 billion and N5.9 billion respectively. Annualised RoAE however moderated to 9.8% in Q1 2020 compared to 12.0% in Q1 2019 and 13.3% in FY 2019.

READ MORE: Seplat reveals new shareholder with over 5% equity 

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Fidelity Bank’s stock closed trading earlier today on the NSE at a share price of N1.70, dropping by -2.30% from a previous close of N1.74. Year to date, the stock has shed about -8%.

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Financial Services

Focus on some key resolutions reached during Ecobank Transnational’s 32nd AGM

Note that this was the first time Ecobank Transnational Incorporated would be holding its AGM by proxies.

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Ecobank Transnational's 32nd AGM

Ecobank Transnational Incorporated (ETI) held its 32nd Annual General Meeting (AGM) and an Extraordinary General Meeting on Tuesday, June 30, 2020. Attendance during these meetings was mainly by proxies, as part of the company’s adherence to COVID-19 preventive measures.

A statement released by ETI to the Nigerian Stock Exchange, as seen by Nairametrics, noted that a number of resolutions were reached during the meetings. For one, the company’s shareholders gave ratification to the co-option of the following new directors:

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  • Mr Deepak Malik, a representative of Arise B.V,
  • Ms Zanele Monnakgotla, representing Public Investment Corporation, and
  • Dr George Agyekum Donkor, representing Ecowas Bank for Investment & Development

READ MORE: UPDATED: Nigeria received $5.85 billion capital inflows in Q1 2020 –NBS

ETI’s shareholders also approved the resolution to renew/retain the services of professional services firms — Deloitte & Touche (Nigeria) and Grant Thornton (Côte d’Ivoire) — as the banking group’s joint auditors.

Meanwhile, as ETI proceeded to hold an Extraordinary General Meeting right after the AGM, more resolutions were reached. Shareholders approved the cancelation of a 2016 resolution on the consolidation of the company’s shares.

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Nairametrics understands that in 2016, during an Extraordinary General Meeting after ETI’s 28th AGM, the company’s shareholders had reached a resolution which directed“that the nominal value of the ordinary shares of the company be increased from two point five (2.5) US cents per share to fifty (50) US cents per share, by consolidating every twenty (20) ordinary shares held into one (1) new ordinary share each and issuing in replacement thereof new ordinary shares of fifty (50) US cents each.” Apparently, this earlier resolution on share consolidation was canceled yesterday after four years.

READ ALSO: PenCom dissolves interim management committee for First Guarantee Pension, appoints new board

Finally, ETI’s shareholders, yesterday, voted in favour of amending the company’s articles of association and including a provision for electronic general meetings. Note that yesterday was the first time Ecobank Transnational Incorporated would be holding its AGM by proxies.

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In its latest earnings report for Q1 2020, the banking group reported interest income of $340.1 million, marking a 5% increase when compared to $322.5 million in Q1 2019. On the other hand, ETI’s profit after tax for the period declined by 20% to $67.5 million, down from $84.5 million in Q1 2019.

The company’s stock is currently trading at a share price of N4.95 on the Nigerian Stock Exchange. Year to date, the stock has declined by more than 22%.

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