Nigeria’s Insurance Sector Eyes Continental Expansion
For decades, Nigeria has struggled with low insurance penetration, a stark contrast to the vast potential of its large population. Despite this challenge, the country is now setting its sights on continental expansion, potentially even domination in the insurance space. Among its African peers, Nigeria has one of the poorest insurance penetration figures. However, it possesses a significant advantage: a huge, vibrant population and the passage of the Nigerian Insurance Reform Act 2025, which is set to create one of the most capitalised insurance companies on the continent.
With these factors in place, what should be the next step for the industry? The National Insurance Commission (NAICOM), the industry regulator, has already anticipated this and has set continental expansion as the next goal for the sector. In early February, Commissioner for Insurance Olusegun Omosehin challenged insurance firms to think beyond the shores of Nigeria and announced the establishment of the Nigerian Insurance Committee on AfCFTA, chaired by Barrister Ekeoma Ezeibe.
The NII-AfCFTA committee includes all arms of the market: underwriting, broking, and loss adjusting. It is tasked with preparing stakeholders to take full advantage of the opportunities created by AfCFTA. Additionally, the committee is responsible for sensitising and creating awareness within the Nigerian market about AfCFTA.
What is AfCFTA?
According to the World Bank, the full implementation of the African Continental Free Trade Area could significantly boost Foreign Direct Investment within the continent by 68 per cent and external investment by 122 per cent. However, before these benefits can be realised, there are challenges such as ironing out the details of the agreement, compromises, and domestication of the terms of the agreement, which have stalled the implementation of the continental agreement.
Academic Dunia Zongwe traced the early days of the continental agreement to June 3, 1991, when states adopted the Abuja Treaty, also known as the Treaty Establishing the African Economic Community. He noted that the treaty was characterised by the prominence of law over politics and the affirmation of integration at the sub-regional level as a prerequisite for continental integration. Instead of implementing the treaty, member states created more regional economic communities and joined multiple regional economic blocs.
Thankfully, African nations have retraced their steps, and on March 21, 2018, 44 member states of the African Union signed the AfCFTA agreement in Kigali, Rwanda. The AfCFTA Agreement officially came into operation on May 30th, 2019, and immediately, three protocols covering trade in goods, trade in services, and dispute settlement entered into force. AfCFTA is celebrated as the world’s largest free trade area since the community of states established the World Trade Organisation in 1994, comprising a market with more than 1.3 billion consumers and a combined GDP of $3.4tn, not forgetting one of the youngest populations in the world.
The operational phase of the AfCFTA Agreement officially began on July 7, 2019, with the launch of the Pan-African Payment and Settlement System at the 12th Extraordinary Summit of AU Heads of State in Niamey, Niger. Afreximbank manages and operates the PAPSS.
AfCFTA and the Insurance Sector
With the devil still very much in the details, the NII-AfCFTA committee has engaged stakeholders in the Nigerian insurance sector, organising workshops and sensitisation programmes to bring players on board and get their suggestions on how to navigate. A critical call made by players at the workshop was the need for regulatory alignment, which NAICOM will have to champion.
The Deputy Managing Director of Insurance Brokers of Nigeria Limited, Eric Omozejele, highlighted the role of NAICOM in paving the road for Nigerian insurance players on the continent. He said, “We have our laws, but how do we modify that to go into the AfCFTA agreement? If you go to Ghana, they have their laws. You go to Kenya, and they have their laws. You go to South Africa, and they have their laws. So, how do we bring these laws together under the AfCFTA agreement?”
The Chairman of the Nigerian Insurers Association, Kunle Ahmed, echoed similar sentiments, saying that he expects a lot more cooperation between regulators. “When there is a lot more cooperation between regulators, there will be common laws that will guide the operations of companies across territories,” he asserted.
Regulatory Challenges and Opportunities
Omozejele noted that with AfCFTA’s implementation, just as Nigerian insurers can enter new markets, others can come into Nigeria. He warned, “As you are going out, please don’t forget your home. There are products that you can still sell in the local markets. If you decide to go and sell outside and you leave the local market, someone is going to come and grab it.”
On this concern, the NIA boss said that insurance was still largely a personalised service, saying, “Someone wants to speak with someone that they know somewhere, and we believe that because we are rooted here, we will be recognised and there will still be patronage for Nigerian companies. That doesn’t mean that we will play the second fiddle when we go to other countries.”
Negotiations and Future Prospects
Speaking with , the chairperson of the NII-AfCFTA committee, Ezeibe, revealed that after initial engagement with insurance companies, brokers, and adjusters, matters were now with the Nigerian Office for Trade Negotiations, which is representing the country’s interest at the continental harmonisation of legal frameworks across state parties.
“We have offers on the table from South Africa, Kenya, representing the East African bloc and Mauritius. So what my committee has done is to look at these offers to know what they entail, what they are offering us. Also, to study the operating environments of all of these countries and their own country-specific laws, and what is required of operators from here trying to venture out into those jurisdictions.”
Ezeibe also dismissed concerns about foreign companies entering the Nigerian market to dominate it, noting that the passage of the NIIRA 2025 had changed the game for players, especially as it enabled insurance players to expand beyond Nigeria.
Experts Weigh In
According to the McKinsey & Company Partner, Head of Africa Financial Services, Mayowa Kuyoro, foreign competition is very much welcome, with the insuring public being the ultimate winner. He said, “Given that we’re coming from three per cent insurance penetration, if anybody wants to come into the market to try and expand, (they are welcome).”
The Head, Financial Institutions Ratings at Agusto & Co, Ayotunde Olubunmi, commended the NAICOM for the AfCFTA push and said that Nigerian players were already in other markets, same as foreign interests are in the country. He, however, raised concerns about forex losses due to the pricing of policies in the local currency.
Olubunmi said, “There are some things that NAICOM needs to also work on, particularly, the regulation which prohibits insurance companies from issuing policies in dollars or in other currencies, aside from the naira.”
