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Nigeria’s rising energy costs are steadily reshaping the economics of running a business, with higher petrol and diesel prices feeding into transportation, power generation and other operating expenses.
For businesses that depend on fuel to keep vehicles moving or generators running, an increase in energy prices can quickly become a wider cost issue, forcing companies to reconsider how they allocate resources, manage operations and invest in alternatives that can provide greater cost predictability.
The pressure does not stop with businesses. As the cost of keeping vehicles and households running rises, consumers are also having to make choices about which expenses they can absorb, reduce or defer.
In the insurance industry, this changing cost environment could influence customer behaviour, particularly in motor insurance, where the cost of owning and operating a vehicle is closely tied to the decision over the type of cover to purchase.
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In an exclusive interview with Nairametrics, Katherine Itua, Executive Director, Finance & Investments, Consolidated Hallmark Insurance Limited, discussed the impact of rising energy costs on the insurance business and how changing operating and household costs could affect motor insurance customers.
Nairametrics: Could sustained high energy costs also change the risks faced by businesses you insure, particularly in sectors such as aviation, oil and gas, marine and motor, and what could that mean for claims and insurance pricing?
Katherine Itua: The impact on aviation, oil and gas, and marine is relatively limited because these highly regulated sectors are required to maintain a minimum level of insurance coverage.
Rising costs may still affect pricing discussions. Operators may pass some costs to third parties or keep premiums unchanged while narrowing the scope of cover. Any adjustment is therefore more likely to appear in the structure of the policy than as a direct premium increase.
Motor insurance is more directly affected. As fuel and vehicle running costs rise, more customers are likely to choose third-party cover over comprehensive policies because it is more affordable.
This shift in customer behaviour is where sustained high energy costs are most likely to influence our claims profile and future pricing discussions.
Nairametrics: Petrol prices have risen to around N1,400 per litre in parts of the country in recent weeks, following an upward trend that began in the first quarter amid tensions in the Middle East. How has the increase in energy costs affected Consolidated Hallmark Insurance’s operations and expenses so far this year?
Katherine Itua: On the petrol price question, we had actually built our projections around N1,500 per litre for this year.
So, the current price levels, as high as they are, still fall comfortably within the range we planned for from the outset. That foresight has cushioned us significantly, and I can say with confidence that rising energy costs have not placed any real strain on our operations or eaten into our numbers so far this year.
Nairametrics: If possible, how much have the company’s total energy-related expenses increased compared with last year, and how significant are these costs within your overall operating expenses?
Katherine Itua: When preparing the 2026 budget, we took a realistic view of current conditions and built inflation into our projections rather than assuming costs would remain unchanged.
At the time, petrol cost about N1,100 to N1,200 per litre, compared with roughly N1,400 today. Although the increase is significant, it was already factored into our budget, allowing us to absorb higher energy costs without materially disrupting overall operating expenses.
Nairametrics: What parts of your operations are most dependent on public electricity supply, and which require petrol or diesel-powered generators? How have the costs of powering these operations changed over the past 12 months?
Katherine Itua: Power is honestly one of those recurring costs we watch very closely. Our head office does not run on the national grid, so from day to day we rely largely on alternative sources, mainly generators and a solar inverter system, to keep operations running smoothly.
Over the past year, we have felt the pinch of rising fuel costs like every other business, and that pushed us to accelerate our shift toward cleaner, more sustainable power.
We have already completed the first phase of a solar inverter upgrade, and before the year runs out, we plan to complete the second phase as well. The goal is straightforward: reduce our dependence on diesel and generators, lean more heavily on solar, and bring a level of predictability to our power costs that fuel prices simply cannot offer right now.
As for diesel, that too has stayed within the range we budgeted for. We planned for around N2,000 per litre, and right now we are sitting around N1,900. We are closely monitoring usage with our alternative source of power.
Nairametrics: With operating costs rising, how much of the additional cost can an insurance company absorb before it begins to affect the pricing of insurance products or the cost of providing services to customers?
Katherine Itua: We must be realistic about our industry. Insurance is a need-based product, purchased when circumstances require it rather than as a discretionary choice. This limits our ability to pass rising costs directly to customers through higher prices.
Instead of relying on price increases, we are prioritising efficiency. Process automation should reduce capital and personnel costs over time, while greater use of solar power will lower our dependence on costly conventional energy after the initial investment.
The benefits may not be dramatic this year, but over time these measures should reduce costs and help shield customers from the impact of rising energy prices.
Nairametrics: If energy prices remain at current levels or rise further over the next 12 to 24 months, what could this mean for the company’s operating strategy, profitability, pricing and plans for expansion or investment?
Katherine Itua: Energy costs should not be viewed in isolation. Office power expenses are relatively fixed and predictable, while fleet fuel costs vary with the number of marketers on the ground pursuing business.
As part of our growth strategy, we are recruiting more marketers to expand our revenue base. Although this will increase fuel costs, the additional income they are expected to generate should significantly exceed that expense.
Rising costs are a normal part of doing business, and growth also requires investment. That is why disciplined budgeting is central to our strategy: each year, we carefully balance projected revenue against expected costs to ensure income continues to outpace expenditure, regardless of how energy prices change.
