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Insurance Sector’s Assets Hit N1.82tn on Recapitalisation Deadline

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WAPIC

Insurance Sector’s Assets Hit N1.82tn on Recapitalisation Deadline

Despite the impact of COVID-19 pandemic on the economy, the insurance industry attracted some investments that boosted its assets, investigation has shown.

Many of the underwriting firms started sourcing for foreign investors to bring in new capital since the National Insurance Commission ordered the firms to beef up their capital requirements in 2019.

Figures obtained from the Central Bank of Nigeria’s report on ‘Insurance sector (general and life) consolidated balance sheet’ revealed that the industry’s asset rose by N410bn from N1.41tn as of the end of third quarter of 2019 to N1.82tn as of the end of third quarter of 2020.

According to the CBN report, the figure which stood at N1.26tn as of the end of 2018 rose to N1.61tn as of the end of 2019.

The statistics further revealed that the assets rose to N1.52tn, N1.79tn and N1.82tn as of the end of first, second and third quarters of 2020 respectively.

NAICOM had mandated that 50 per cent of the minimum paid-up capital for insurance and 60 per cent for reinsurance must be met by 31 December 2020.

The regulatory body had stated that insurance companies that failed to satisfy the required minimum paid-up capital by December 31, 2020 would be restricted on the scope of business they could transact.

Life and general insurance companies were asked to shore up their existing minimum paid-up capital from N2bn and N3bn to N4bn and N5bn respectively by the end of December 2020, and meet the final minimum paid-up capital requirements of N8bn and N10bn respectively by the end of September 2021.

Composite companies and reinsurance firms were asked to shore up from existing minimum paid-up capital of N5bn and N10bn to N9bn and N12bn by end of December 2020 and to N18bn and N20bn respectively by the end of September 2021.

Some operators had urged NAICOM to waive the first phase of its segmented recapitalisation.

The underwriters also urged NAICOM to consider their challenges by amending some of the requirements in the recapitalisation directive.

The operators said they were more concerned about the aspect relating to attainment of certain thresholds by 31 December 2020, failing which the commission would restrict the scope of business insurance and reinsurance companies would transact.

According to them, the huge impact of COVID-19 on the financial services sector and the national economy at large, coupled with the situation that was worsened by losses from the nationwide #EndSARS protests in the later part of 2020 affected them.

However, as NAICOM’s directive remained, some displeased operators dragged the regulator to court, using some shareholders’ associations.

On December 9, 2020, the House of Representatives asked NAICOM to suspend the December 31, 2020 deadline set for operators in the insurance industry to recapitalise.

This led the commission to suspend the first phase of the recapitalisation, leaving the second phase scheduled to end by September 2021.

However, some underwriters had declared on their own that they met the requirements before the first phase of the recapitalisation was suspended.

The Managing Director/ Chief Executive Officer, SUNU Assurances Nigeria Plc, Samuel Ogbodu, said the company successfully completed the first phase of its recapitalisation plan by increasing its shareholders’ fund to N6.61bn in 2020 from N3.47bn in 2019.

NSIA Insurance also said it successfully completed the phase 1 of its recapitalisation exercise to fulfil the requirements for the mandatory minimum paid-up share capital policy for a composite insurance firm in Nigeria.

FBN General Insurance said it was one of the few general insurance businesses to meet the first phase of recapitalisation before the directive was put on hold.

Lasaco Assurance Plc also said it scaled the first hurdle of the recapitalisation before the suspension.

During the public hearing on Consolidated Insurance Bill 2020 organised by the House of Representatives Committee on Insurance and Actuarial matters in Abuja, the Nigerian Insurers Association recommended introduction of Risk Based Capital in the Consolidated Insurance Bill.

It described it as the right capital model for the insurance industry in order to align the Nigerian insurance market with international best practice and reposition the industry for accelerated growth and development.

In adopting risk based capital adequacy template, the Chairman, NIA, Mr Ganiyu Musa, said the association took cognisance of the need to consider insurance risk, market risk, credit risk, and operational risk as well as the need to apply such capital charges on assets and liabilities (all capital resources inclusive).

He hinged the association’s position on the 2013 IMF report on the Nigerian insurance industry which prescribed the risk based capital model as most suitable for the Nigerian insurance market.

According to him, the IMF report was duly acknowledged and admitted by the National Insurance Commission as the right capital framework for the market, as it sought to limit the capital required by operators to the level of risks they can carry.

When the Bill is eventually signed into law in line with this proposal, he said, it would lay to rest the contentious issue of the definition of capital which had been a major point of the association’s engagements with the NAICOM on the recapitalisation.

“We are convinced that risk based capital adequacy template is the best fit for the insurance industry in Nigeria especially given the fact that the 2013 IMF report has prescribed it and the commission agreed with it,” he stated.

He added that this would also align the definition of insurance with the various positions such as International Association of Insurance Supervisors recommendations.

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.

Finance

Emefiele Pledges Accommodative Monetary Policy to Boost Economic Growth

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Godwin Emefile

Emefiele Pledges Accommodative Monetary Policy to Boost Economic Growth

The Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, has pledged to adopt accommodative monetary policy stance in 2021 in order to support economic growth in the country.

Emefiele, said this on Friday, while speaking at a CBN/Bankers’ Committee’s initiative for economic growth, which is a one-day special summit on the economy by bank chief executive officers.

The theme of the summit is: “How to Overcome the Pitfalls of Recession.”

Nigeria’s economy recently came out of recession, according to the Gross Domestic Product report for fourth quarter 2020 released by the National Bureau of Statistics.

Owing to the slump GDP growth of 0.11 per cent that lifted the economy out of recession, Emefiele said it was imperative that, “we do all we can in 2021 and beyond to ensure that we build on the positive momentum and strengthen our efforts at stimulating growth.”

He expressed optimism that with the discovery and deployment of vaccines worldwide, 2021 would be a year of massive global recovery and Nigeria must not be left out.

“The banks CEOs are here, whether by moral suasion or by force, they will have to participate in this journey. In order to drive and sustain this recovery therefore, we need to sustain the accommodative fiscal and monetary policy measures aimed at improving access to finance for households and businesses.

“Secondly, we must prevent a resurgence in Covid-19 related cases. Thirdly, we must ensure that a significant number of our population is significantly vaccinated and also improve foreign exchange inflows into our country,” he added.

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Banking Sector

CIT Microfinance Bank Disburses Over N16bn Loans

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CIT Microfinance Bank Disburses Over N16bn Loans

CIT Microfinance Bank Limited says it has disbursed about N16bn loans since it commenced operations as part of its contributions to the financial sector and empowerment of businesses.

The Managing Director of the microfinance bank, Mr Kingsley Eremionkhale, disclosed this during the company’s 10th anniversary in Lagos recently.

He reiterated that the bank was committed to supporting the growth of small and medium-scale enterprises in the country.

“Since inception, we have disbursed loans worth about N16bn. Our operation is not just about profit-making, but we have impacted many lives, empowered many businesses, and done a lot in terms of our core mandate as a microfinance bank.”

While appreciating its customers who had been loyal to it for years, he said it was concerned about their business success.

The managing director said, “We are part of our customers’ businesses. We provide services beyond lending and savings products and we also give financial advisory services.”

He appreciated the customers who had stayed with the financial institution for many years.

The managing director noted that the MfB is a state-licensed bank operating in Lagos, and a subsidiary of Capitalfield Investment Group.

He also attributed the success of the MfB to the board of directors which it said had been supportive, the management team and its workforce in the past 10 years.

While saying that the bank could lay claims to exponential growth, he said the public should expect more from it.

He also said that it was driving its operations through its digital offerings and our e-channels, to improve its services to our customers.

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Finance

FMDQ Approves Valency Agro’s N5.12bn Commercial Paper

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FMDQ

FMDQ Approves Valency Agro’s N5.12bn Commercial Paper

FMDQ Securities Exchange Limited has announced the approval of the quotation of the Valency Agro Nigeria Limited N5.12bn Series 1 Commercial Paper under its N20bn CP Programme on its platform.

The Exchange said in fostering the development of the Nigerian debt capital markets, it had continued to avail its credible and efficient platform as well as tailor its listings and quotations services to suit the needs of issuers and registration members through innovative and uninterrupted service delivery.

It said in a statement on Thursday that the Valency Agro Nigeria CP debut issue came at a time when the Nigerian economy was bedeviled with soaring food prices, amidst compounding challenges of insecurity.

It said the agricultural sector and its attendant transformation agenda had never been more important in driving increased and sustainable production of agricultural products as well as the derived foreign earnings through exports.

The Exchange said the proceeds from the issue of the CP would be applied by Valency Agro towards meeting the mid-term working capital requirements of the various agricultural produce under its portfolio such as cashew, sesame, cocoa and in value addition prior to export.

The Executive Director, Valency Agro Nigeria Limited, Mr Sumit Jain, was quoted as saying, “We are thankful to our investors towards showing their faith in our agenda to grow the agriculture-focused business with a clear aim to maximise value addition and create employment opportunities in Nigeria.

“We would also like to commend the efforts made by FBNQuest Merchant Bank Limited’s team to build the reach and FMDQ for their unconditional support for the industry”.

The Head, Capital Markets, FBNQuest Merchant Bank, Mr Oluseun Olatidoye, said, “FBNQuest Merchant Bank Limited is delighted with the successful debut of the N5.12bn Series 1 CP issued by Valency Agro Nigeria Limited. This reiterates our effort to enable underserved sectors access the debt markets, optimise their capital structure and further deepen the domestic capital markets.

“We are proud of the instrumental role FBNQuest Merchant Bank played in this transaction and appreciate the trust the management of Valency Agro placed in us to assist them. Our clients remain our priority, and we strongly believe their success is our success.”

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