Connect with us

Markets

Banks, Tech Firms Combat N2.19bn e-fraud With Cyber-insurance

Published

on

cybercrime - Investors King
  • Banks, Tech Firms Combat N2.19bn e-fraud With Cyber-insurance

Banks and financial technology firms are beginning to see the need to explore cyber-insurance as a means of alleviating the impact of electronic payment fraud in the country.

Industry statistics show that Nigeria is losing about N127bn to cyber-fraud every year. A report by the Nigerian Electronic Fraud Forum also indicates that N2.19bn is lost to electronic payment fraud annually.

The Central Bank of Nigeria, according to findings, is taking the lead in adopting cyber-insurance coverage even as there is a growing interest by the Deposit Money Banks and fintechs in managing cyber-risks with an insurance policy.

While the sources of the fraud in the financial industry are known, electronic movement of money by cybercriminals, who hack into the system, has necessitated the need to seek insurance cover to mitigate losses.

Though most organisations prepare to mitigate cyber-threats by upgrading their cybersecurity system, insurers say many of them do not understand that system upgrade may not address some of the exposure they face.

The Assistant General Manager, Clients Services, SCIB Nigeria and Company Limited, Mr. Roberts Abodunrin, explained that NeFF had started looking into solutions that could address electronic fraud due to the success the firm recorded in providing similar solutions to mCASH.

He said, “Sometimes when making payment online, it may not get to the intended owners and sometimes cybercriminals may have hacked into the payment system. The CBN has seen the exposure and is looking for the solutions that will take care of the exposure in the online payment gateway.

“We are telling the banks and payment gateways that the policies, such as fidelity guarantee insurance, which covers fraud from workers and connivance from outside as well as armed robbery attacks, are physical threats but financial fraud is not physical anymore.

“These policies are currently outdated because they cannot capture what is really happening. That is why cyber-insurance is important for cyber-risk exposure for new threats we are beginning to experience. The solution is offshore and is currently not in Nigeria.”

The Nigeria Deposit Insurance Corporation, in one of its reports on the number of fraud cases in banks, revealed that the number of fraud cases attributed to internal abuse by bank workers increased from 231 in 2016 to 320 in 2017, or 38.53 per cent above the figure reported for the previous year.

The report stated that the 286 responses received from banks in 2017 cited 26,182 cases of fraud and forgeries, which were 56.30 per cent higher compared to 16,751 cases reported in 2016.

In addition, the amount involved in the reported fraudulent activities increased by 3.33bn from the 8.68bn reported in 2016 to 12.01bn in 2017 or 38 per cent.

For online banking and the ATM card-related fraud, the NDIC stated that 24,266 cases were reported, representing 92.68 per cent of all the reported cases. These amounted to 1.51bn or 63.66 per cent of losses in the industry in 2017.

The National Information Technology Development Agency had earlier this year alerted the country to potential cyberattacks, saying that the banking, health, power and transportation systems as well as other critical national infrastructure would be targeted.

The agency had last week given approval for the upgrade of the Central Bank of Nigeria’s Information and Communications Technology security and systems infrastructure projects.

Despite the increasing awareness of cyber-insurance in the financial services sector, insurers and brokers in the country have not developed adequate capacity to underwrite cyber-risks.

The Assistant Executive Secretary, Nigerian Council of Registered Insurance Brokers, Mr. Temitope Adaramola, explained that not many underwriting firms had started providing cover for cyber-fraud due to knowledge deficit in the area.

According to him, the uptake of insurance services in the country is very slow due to the reactive nature of Nigerian companies to risks.

Presently, Adaramola stated that less than 10 per cent of underwriters were providing cyber-insurance policies through international brokers.

He said, “In this clime, there is always an impression that we are living in a world of our own. We are living in self-denial just like our lethargic reactions to other issues. Those who are proactive among them have started looking into it considering that insurance is a global business.

“The momentum in terms of exchange of ideas and discussions during special programmes increased about two years ago. Cyber-insurance has gained traction in many advanced countries. The good thing about it is that the advanced markets of the world are not leaving the issue lying low. They are making us to realise that it is a matter we have to take seriously. It may take a little while but we are not really there yet.”

According to Adaramola, South Africa and Egypt have a high level of acceptance of cyber-insurance as a risk management device compared to other African countries, including Nigeria.

The Head, Enterprise Risk Management and Compliance, FBN Insurance Limited, Mr. Raymond Akalonu, noted that the cyber-insurance policy being offered in the country was underwritten by international brokers.

According to him, re-insurance backing will be required to domesticate cyber-insurance in the country.

He noted that fintech companies with international exposure like Remita and SystemSpecs were demanding cyber-insurance cover for online theft.

“What we do in the country is more or less like providing cover on the basis of foreign insurance. We are losing a lot of money, money that should have come here to increase insurance contribution to the GDP,” Akalonu said.

He added, “Again, growing local capacity is what we are losing. Supposing Nigerian brokers start paying claims, they will learn through the entire insurance value chain. Insurers will know what is expected or not but because we are not writing it, it is increasingly difficult to learn compared with when we underwrite.

“We are now fronting for other underwriters but if it is your own policy, you go the extra mile by getting trained.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Continue Reading
Comments

Crude Oil

Brent Crude Falls to $84.12, WTI Rises to $80.19

Published

on

Brent crude oil - Investors King

In a cautious market, oil prices showed mixed movements in Asian trade on Tuesday.

Global benchmark Brent crude oil, against which Nigerian oil is priced, experienced a slight decline of 13 cents, or 0.15%, to settle at $84.12 per barrel.

Meanwhile, U.S. West Texas Intermediate (WTI) crude oil saw a modest increase of 14 cents, or 0.17% to $80.19 per barrel.

The recent fluctuations come after both benchmarks posted significant gains of around 2% on Monday, marking their highest closing prices since April.

The market’s attention has now shifted back to fundamental factors, which have exhibited signs of softness for some time.

Francisco Blanch, a commodity and derivatives strategist at Bank of America, noted in a client note that global crude oil inventories and refined product storage in key locations such as the United States and Singapore remain elevated.

“The oil market shifted its focus back to fundamentals, which have been soft for some time,” Blanch stated, highlighting the broader concerns about global demand growth.

Data from the first quarter of the year indicated a deceleration in global oil demand growth to 890,000 barrels per day year-on-year, with further slowing likely in the second quarter.

Also, according to the country’s statistics bureau, China’s oil refinery output fell by 1.8% year-on-year in May due to planned maintenance and higher crude costs.

Market participants are also keenly watching for further indications on interest rates and U.S. demand trends, with several U.S. Federal Reserve representatives scheduled to speak later on Tuesday.

Despite the mixed signals, some analysts remain optimistic about the impact of OPEC+ supply cuts.

Patricio Valdivieso, vice president and global lead of crude trading analysis at Rystad Energy, said, “The latest guidance provided by OPEC+, as well as their unchanged 2.25 million barrels per day demand growth outlook, signals a stagnation in oil supply growth for 2024 and an apparent downside risk to production in 2025.”

Valdivieso further noted the disconnect between OPEC+’s demand outlook and those of other agencies, making it challenging to adopt a fully bearish stance on the market.

This sentiment has been reinforced by recent investor behavior, with hedge funds and other money managers purchasing the equivalent of 80 million barrels in key petroleum futures and options contracts over the week ending June 11.

Support for the market has also come from a rebound in refining margins, particularly in Europe and Asia.

Sparta Commodities analyst Neil Crosby pointed out that refining margins at a typical complex refinery in Singapore averaged $3.60 a barrel for June so far, up from $2.66 a barrel in May.

As the market navigates these dynamics, the cautious optimism among investors and analysts suggests a period of continued volatility and adjustment, with fundamental factors and policy decisions playing pivotal roles in shaping future price movements.

Continue Reading

Energy

Dangote Refinery’s Power Production Dwarfs National Grid’s 11-Year Progress

Published

on

ossiomo

The stark contrast in power generation between Nigeria’s national grid and Dangote Refinery has come into sharp focus as Dangote Refinery generates twice the national power production.

Over the past eleven years, Nigeria has managed to add a mere 760 megawatts (MW) to its national grid, while the Dangote Refinery has outpaced this growth significantly with  1,500 MW in a much shorter timeframe.

For decades, Nigeria has grappled with chronic power shortages, an issue that has repeatedly dominated election campaigns and policy debates.

Data from the Nigeria Electricity System Operator revealed that power delivery from Generation Companies (Gencos) to Distribution Companies (Discos) via the Transmission Company of Nigeria (TCN) has seen only a modest increase.

From an average of 3,400 MW in November 2013, it has risen to 4,160 MW as of June 12, 2024, marking a 22 percent increase.

In stark contrast, the Dangote Refinery, which began construction in 2018, now produces 1,500 MW of power for its operations.

This significant output not only surpasses the national grid’s decade-long expansion but also emphasizes the private sector’s ability to address Nigeria’s power challenges more efficiently.

“We don’t put pressure on the grid. We produce about 1,500 megawatts of power for self-consumption,” stated Aliko Dangote at the Afreximbank Annual Meetings and AfriCaribbean Trade & Investment Forum in Nassau, The Bahamas.

This development underscores concerns regarding the slow pace of growth in Nigeria’s power sector despite substantial investments and an 11-year-old privatisation effort.

“The government and some operators in the sector may claim there has been some form of growth since 2013, but in actual terms, how many people are benefiting from the privatised power sector?” questioned Charles Akinbobola, a senior energy analyst at Sofidam Capital.

He added, “The challenge of the power sector has not entirely been the scarcity of funds. Several trillions of naira have been pumped into that industry. The sector has been plagued by the shortcomings of its managers.”

Comparatively, Nigeria’s power production capacity of 13,000 MW falls significantly short of South Africa’s 58,095 MW, despite having a similar-sized economy and a quarter of Nigeria’s population.

The ageing national grid, however, delivers only about 4,000 MW to over 200 million citizens—roughly the power consumption of Edinburgh’s 548,000 residents.

Other African nations have made more significant strides in addressing their power needs.

Egypt, for instance, added 28,229 MW to its national grid between December 2015 and December 2018, achieving a total installed capacity of 58,818 MW.

This was accomplished through a fast-track project and a substantial partnership with Siemens, adding 14,400 MW in just 2.5 years.

The sluggish growth of Nigeria’s power sector is not just a technical issue but a significant economic one. Rising energy costs and unreliable power supply have disrupted productive activities, forcing many factories to self-generate more than 14,000 MW of electricity.

According to the Manufacturers Association of Nigeria, member companies spent N639 billion on alternative energy sources between 2014 and 2021, further highlighting the inefficiencies within the public power supply system.

“The power sector’s inefficiencies cost consumers billions of naira and stifle economic growth,” noted Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise. “There are issues of technical and commercial losses which are yet to be addressed. These inefficiencies are costs that consumers are compelled or expected to pay for as part of the cost recovery argument.”

The stark contrast in power generation between the Dangote Refinery and the national grid serves as a wake-up call for Nigeria’s power sector.

It underscores the urgent need for comprehensive reforms, better management, and increased investment to meet the growing energy demands of the nation’s burgeoning population.

Continue Reading

Crude Oil

Nigerian Oil Theft Escalates to 400,000 Barrels a Day, Exposing Systemic Corruption

Published

on

pipleline vandalisation

A recent report has revealed that Nigeria’s daily oil losses surged to 400,000 barrels as efforts to curb crude oil theft remain ineffective.

This escalation from 100,000 barrels per day in 2013 underscores the severe and worsening challenge facing the nation’s oil sector.

The report, produced by the public policy firm Nextier, is the result of several months of in-depth investigation.

It reveals a complex web of sophisticated networks involving powerful actors, foreign buyers, security personnel, transporters, and government officials.

This elaborate system facilitates the large-scale theft of crude oil, which has been a significant drain on Nigeria’s economy.

From 2009 to 2021, Nigeria lost 643 million barrels of crude oil, valued at $48 billion, due to theft. This loss represents more than half of the nation’s national debt as of 2021.

The situation has also severely impacted Nigeria’s ability to meet its OPEC quotas, which have dwindled from 2.5 million barrels per day in 2010 to just 1.38 million barrels per day.

The report, authored by Ben Nwosu, an associate consultant at Nextier, and Ndu Nwokolo, a managing partner at Nextier, paints a grim picture of the local dynamics fueling this crisis.

It highlights the involvement of multiple small-scale artisanal actors, who are often supported by local political and security forces. These local actors contribute to the creation of underground economies, further complicating efforts to curb theft.

Environmental hazards are another grave concern. Illegal refining processes, characterized by uncontrolled heat and poorly designed condensation units, have led to numerous explosions. Between 2021 and 2023 alone, these operations resulted in 285 deaths.

Despite these dangers, illegal refineries continue to thrive due to economic necessity and systemic corruption.

Nigeria’s four refineries, which have a combined capacity of 445,000 barrels per day, are currently operating at only 6,000 barrels per day due to mismanagement and corruption.

This shortfall forces the country to rely heavily on imported refined products, further exacerbating the situation.

Massive corruption in oil importation and subsidies has led to billions of naira being unaccounted for between 2016 and 2019.

Moreover, the government’s inability to support modular refineries has perpetuated reliance on illegal operations.

Security forces are often implicated in the theft, providing protection for a fee. Although recent measures, such as the destruction of illegal refineries, have offered temporary relief, these efforts have been short-lived.

New illegal operations quickly emerge, perpetuating the cycle of theft and corruption.

The authors of the report emphasize that addressing this complex issue requires more than punitive measures. They call for a comprehensive approach that tackles the root causes, including the need for effective governance and economic opportunities for affected communities.

Continue Reading
Advertisement




Advertisement
Advertisement
Advertisement

Trending