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Insurance Sector Growth Rate Dwindles in Third Quarter 2017

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  • Insurance Sector Growth Rate Dwindles in Third Quarter 2017

Despite efforts by insurance sector operators and regulators to deepen insurance penetration in Nigeria and boost the sector’s contributions to the Gross Domestic Product (GDP), the sector merely recorded 0.32 percent growth in third quarter 2017 .

This depicts an abysmal performance that is -24.53 percent lower than its growth performance in the corresponding period in 2016 and -21.56 percent lower than the growth rate achieved by the sector in the preceding quarter.

According to the third quarter 2017 GDP report released recently by the National Bureau of Statistics (NBS), the Finance and Insurance Sector consist of the two sub sectors, Financial Institutions and Insurance, which account for 87.09percent and 12.91 percent of the sector respectively in real terms.

According to the report, as a whole, the sector grew at -3.88 percent in nominal terms (year on year), with the growth rate of Financial Institutions as -4.47 percent and 0.32 percent growth rate by the Insurance sector.

The report said the overall growth rate was lower than that in third quarter of 2016 by -24.53 percent points, and lower by -21.56 percent points than the preceding quarter. The sector’s contribution to the overall nominal GDP was 3.04 percent in third quarter of 2017, lower than the 3.51 percent it represented a year previous, and yet lower from the contribution of 3.75 percent it made in the preceding quarter.

Again driven by the financial institutions activity, growth of the sector in real terms totalled -5.96 percent , lower by -8.61 percent points from the rate recorded in 2016 third quarter and down by -16.42 percent points from the rate recorded in the preceding quarter.

“Quarter on quarter growth in real terms stood at -11.67 percent .The contribution of Finance and Insurance to real GDP totaled 2.69 , lower than the contribution of 2.90 percent recorded in the third quarter of 2016, yet lower than 3.32 percent recorded in the preceding quarter.

This by interpretation means that despite efforts to ensure that the insurance sector contributes meaningfully to the GDP of the economy, it has maintained its hitherto position as the poor cousin of the banking sector which obviously is the leader of the finance sector of the economy.

This is despite the projection by the insurance sector regulator the National Insurance Commission that come the year 2017, the insurance sector would achieve its target of growing its overall premium from the current level of N400 billion to N1.1 trillion riding on the van of its much talked about Market Development and Restructuring Initiative (MDRI) , a medium term plan for the industry launched in 2009 by the regulator.

The initiative, targeted the creation of 50,000 jobs for the industry through the agency system, improve insurance contribution to the GDP to 3 percent, grow premium income generation to over a trillion Naira through the enforcement of compulsory insurances and fight against activities of fake insurance operators.

Irked by the obvious lackadaisical performance of the sector, the operators vowed not to rest on their oars in their efforts to improve on the sector’s performance going forward.

According to the Director General of the Chartered Insurance Institute of Nigeria, Richard Borokini who was former Group Managing Director Royal Exchange Assurance Plc, the sector’s major problem has remained lack of awareness of its value in Nigerians’ day to day living.He also said poor purchasing power of the masses in the face of the dwindled economy directly affects insurance products sales as consumers always strike out insurance from their budget once there is lack of funds to meet their needs.

The institute’s president Mrs Funmi Babington-Ashaye, said poor perception of insurance by Nigerians and religious and cultural beliefs also constitute big problem to the industry.

She however said the sector operators will not give up but would intensify efforts at awareness creation especially among youths through the industry’s catch them young programme.

She also said the industry’s rebranding project expected to kick off in January 2018 will go a long way to solve the problem.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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