Insurance, pension sectors urged to drive Nigeria’s $1trn economy goal

Onome Amuge

With Nigeria’s ambition to reach a $1 trillion economy by 2030, the onus lies on key players in the insurance and pension sectors to employ innovative strategies and execute carefully devised plans, as advised by experts in the sector.

This shift in focus comes at a time when the country’s economy is struggling to contain an inflationary spiral and a weakening naira, making the journey towards the trillion-dollar milestone increasingly challenging.

Olusegun Omosehin, the commissioner for insurance, National Insurance Commission (NAICOM), recently highlighted the pivotal role of the insurance industry in achieving the projected $1 trillion economy envisioned by the federal government.

Omosehin underscored the importance of maintaining the financial soundness and stability of the insurance industry to provide the necessary support and stability for businesses, ultimately contributing to the nation’s economic aspirations and growth.

Omosehin stated this during the 9th annual conference of the Nigerian Association of Insurance and Pension Editors (NAIPE) in Lagos.

The conference, themed “Towards A $1 Trillion Economy: Roles of Insurance and Pension Sectors”, served as a platform for experts and industry leaders to discuss the vital roles of these sectors in contributing to the nation’s economic prosperity.

The commissioner for insurance, represented by Abba Halil Inuwa, head of corporate affairs, NAICOM,delivered a clear and concise message on the vital importance of adequate capitalisation tailored to insurers’ risk profiles as a cornerstone for the industry’s development and growth.

He also underscored that the desired and pragmatic support for a $1 trillion economy could only be achieved by leveraging technology to enhance insurance accessibility.

Highlighting the rapidly changing financial landscape, Omosehin noted that consolidated financial solutions and one-stop shops have become the norm in today’s world, necessitating the insurance industry to adapt and innovate to remain relevant and at the forefront of the economic ecosystem.

“As the insurance regulator, NAICOM is therefore committed to creating an enabling environment that will consistently enhance increased capacity of the insurance institutions,  as well as ensuring that the insurance industry becomes stronger and more stable in delivering on its responsibilities,” he stated.

the NAICOM commissioner underscored the crucial role of the insurance industry as a vital cog in the financial sector, highlighting its pivotal role in mobilising savings, managing risk, ensuring financial stability, creating employment opportunities, and driving long-term projects and infrastructure development.

To realise these objectives, he noted that the commission had implemented various market developmental initiatives designed to improve the sector’s competitiveness and robustness.

“In line with the insurance industry roadmap, we have identified five critical areas for immediate implementation.

“These encompass safeguarding policyholders’ interests; strengthening supervisory capabilities; improving industry safety and soundness; fostering innovation and sustainability; and enhancing insurance accessibility and penetration.

“With the current strategies in place, the Nigerian insurance market is poised for rapid and stable growth, characterized by significant improvements in operational statistics.

“A collaborative effort among sector stakeholders will facilitate seamless growth. Our collective focus must remain fixed on fulfilling obligations to policyholders,” he stated.

Afolabi Olowookere, managing director and chief economist of Analysts Data Services and Resources, echoedOmosehin’s sentiments, highlighting the crucial role of the insurance sector in the Nigerian economy.

Citing data from the National Bureau of Statistics (NBS), Olowookere noted that while agriculture, ICT, trade, and manufacturing are the leading contributors to the GDP, the finance and insurance sector has continued to drive the economy as the fastest-growing sector in recent times, contributing  6.57 percent to the GDP.

Olowookere pointed out that, despite the negative impact of high inflation and exchange rates on various sectors of the economy, the insurance and pension sectors must embrace these challenges to remain relevant and competitive.

According to him, technological advancements such as Artificial Intelligence (AI), machine learning, and blockchain could revolutionize research, portfolio management, and back-office operations in the sector, leading to greater efficiency and more effective risk management practices. These, he asserted, would be crucial in ensuring the sector’s continued growth and relevance in driving the economy towards the $1 trillion target.

“By improving efficiency and reducing costs, they can offer better returns to contributors and attract more funds, driving  economic growth through smarter and more sustainable investments,” he stated.

Expanding on the topic of capitalisation, Olowookere advised the insurance and pension sectors to capitalise on the opportunity to expand their assets by promoting retirement savings among Nigerians and taking on higher portfolio risks. According to him, the increasing life expectancy and the growing wealth of the population would lead to the growth of these funds, which would then be available for long-term investments in the economy.

Olowookere presented projections from ADSR Research and Estimates, which revealed that the projected total assets of the insurance sector under the $1 trillion GDP target would drop significantly from $3.9 billion in 2023 to $2.2 billion in 2024 due to the depreciation of the naira.

While acknowledging the challenges ahead, Olowookere presented the baseline projection for Nigeria’s GDP, forecasting a steady increase from $265.4 billion in 2024 to $681.9 billion in 2030.

Further underscoring the pivotal role of the insurance sector in driving economic growth, Olowookere reiterated that the projected total assets of the insurance sector would be $6.4 billion at the baseline growth rate and likely to hit $20.5 billion if the government’s $1 trillion GDP target is met.