Insurers anticipate inflow of foreign investment on back of liberalized FX policy
Insurance operators have applauded the new CBN foreign exchange policy, expressing optimism that it will increase market liquidity, inflow of foreign direct investment, spark in marine business and increased activity in the domestic economy.
They also expect that the insurance industry will benefit from the impact as it will stimulate inflow of foreign investment into the industry, giving the potential and growing interest by offshore players.
Wale Onaolapo, chairman, Davisther Brokers Limited said the recent FX policy framework announced by CBN is commendable and a step in the right direction although long overdue.
“With the floating of the exchange rate, FDI inflow is expected to receive a big boost thereby stimulating growth of Nigeria’s economy.”
Onaolapo also stated that the insurance sector is expected to be one of the greatest beneficiaries of this policy move by Government in that foreign investors now have it on a platter of gold to enter the Nigerian insurance space.
“M & A activities will take a new dimension in terms of entrance of global brands into the sector and this will definitely support the new Commissioner for Insurance’ desire to have a more robust and strong insurance industry to regulate and supervise.”
I just hope that serious minded operators will capitalize on this opportunity as the competitive landscape will never remain the same again, Onolapo noted.
Mayowa Adeduro, managing director, Anchor Insurance Company Limited said the focus of the new CBN policy on FX is to bring flexibility in the exchange market and this is expected to bring improved liquidity into the market.
“Overtime it will enhance efficiency and fluidity of the market and make the market predicable and will enhance inflow of FDI. It will bring about price stability and enhance trade negotiation.”
Adeduro observed also said that the expected impact in insurance sector will enclose enhancement of Marine Cargo Insurance. It will assist to encourage more foreign investors into the sector and overall, is expected to have a long time beneficial effect to the growth potential of insurance sector.
Gus Wiggle, chairman, Nigerian Insurers Association (NIA), said the flexible foreign exchange window will boost economic activity, including in ports. “We expect the marine insurance will pick up as soon as activities resume in the ports, Wiggle stated.
Before now, foreign investors including Old Mutual in Oceanic insurance; NSIA in ADIC; Sanlam in partnership with First Bank in FBN Insurance; Saham Finances Unitrust Insurance; AXA in Mansard; Greenoaks in Union Assurance have taken position in the local market with a lot of expectation.
It is obvious therefore that these foreign investors have seen this strong potential and are currently taking positions while hoping that the market would take-off. A recent report by Barclays Equity Research Limited stipulates that these foreign owned insurance companies have taken interest in Africa and Nigeria in particular because of the inherent strong growth potentials. These potentials are drawn from Nigeria’s huge population of about 174 m of which about 55 percent fall between the ages 15 – 64 years old (i.e. economically active population), a strong GDP per capita of about $3,000 and average real GDP growth rate of about 6.7 percent before 2015 and early part of 2016 when the economic growth has slowed due to falling oil prices and scarcity of FX.
The Central Bank of Nigeria had on Wednesday announced a flexible foreign exchange regime that would see the country abolishing the dual exchange rate regime. Under the new plan, the official exchange rate of the naira will exist in a “single flexible window,” which will likely be determined by market forces.
Godwin Emefiele, CBN Governor had said at the release of the FS guideline in Abuja that in line with the objectives of enhancing efficiency and facilitating a liquid and transparent, Foreign Exchange (FX) market, the Central Bank of Nigeria (CBN) shall operate a single market structure through the autonomous/inter-bank market i.e. the Inter-Bank Foreign Exchange Market with the CBN participating in the FX market through interventions.
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