The Crisis of Financial Literacy and Insurance in Lagos Markets
The recurring fire outbreaks in Lagos markets have highlighted a critical gap in financial literacy, particularly concerning insurance protection. Traders, who are often the backbone of the local economy, find themselves in a state of helplessness when these disasters strike. The recent fire at Mandilas on September 16 serves as a stark reminder of this vulnerability, as it destroyed over 200 shops worth billions of naira. This incident has not only devastated the shop owners but also exposed the lack of adequate insurance coverage in the informal sector.
Insurance is a vital component of financial resilience in many developed economies. It helps mitigate risks that support entrepreneurship, secures households against unforeseen shocks, promotes long-term savings and investments, and stabilizes financial markets. However, Nigeria’s insurance penetration remains alarmingly low at less than 1.0 per cent, significantly below the global average of 6.8 per cent and several African countries like South Africa (11.54 per cent) and Kenya (2.25 per cent).
Tales of Unfortunate Incidents
Anthony Obidi, a trader at King Plaza, shared his harrowing experience, noting that this was his second encounter with fire in less than two years. He described the recent incident as adding salt to injury, especially during the peak of the festive season. “I lost goods and my shops. Last year we experienced something similar, and now, unfortunately, this year at this critical time of the year,” he said. Obidi lamented that the fire outbreak has not only destroyed their businesses but also deprived them of the ability to meet financial responsibilities, including paying school fees for their children.
Evans Iheanancho, whose shop was razed by fire, recounted losing over N7m and resorting to faith in God and potential government support. “We are stranded and looking unto God to know our next fate,” he said. He emphasized the challenges of meeting financial obligations at home, highlighting the impact on his family.
Another shop owner, Sodiq, admitted that his business was not insured and expressed hope for a miracle to recover from the incident. “We need help. The fire outbreak ruined my business. It has become hard to feed,” he said.
Expert Insights
Professor Nwite Christian, a professor of Insurance and Finance at Ebonyi State University, emphasized the need for shop owners to be covered by fire insurance policies. He expressed concerns over the apathy towards insurance cover in the informal sector. “Nigeria, as a developing country, doesn’t value insurance, and most of the policies the government makes are not actually supervised or implemented,” he said.
Olusegun Omosehin, Commissioner for National Insurance Commission, stressed the importance of financial literacy for entrepreneurs in medium and small-scale enterprises (MSMEs). “The issue is certainly not that of lack of availability of products. It’s the non-desire of those entrepreneurs, or their lack of understanding to deliver the actual need of protection,” he said.
A unit manager at the American International Insurance Company (AIICO) explained that businesses in the informal sector fall under the non-life insurance category, which protects their assets from both fire and burglary risks. “The purpose of insurance is to bring the person back to this current position. For instance, if one has like a billion naira worth of business, what the person might pay can be less than 1% of that worth,” he said.
He revealed that there is a growing apathy for entrepreneurs to insure their businesses, but added that insurance institutions that fail on their part can be sued. “If somebody is insured and it’s not paid, you can sue the person. But there is a policy document that will be given to you,” he said.
Conclusion
The recurring fire outbreaks in Lagos markets underscore the urgent need for improved financial literacy and insurance coverage among traders. While insurance companies and regulatory bodies play a crucial role, the responsibility also lies with the entrepreneurs to understand the importance of protecting their assets. As the market continues to face such challenges, the call for awareness and action becomes more pressing than ever.
