The business outlook for the insurance industry in 2018 is mixed but promising judging from the premise of the 2018 national budget.
This view was expressed by the President of the Chartered Insurance Institute of Nigeria (CIIN), Mrs. Funmi Babington-Ashaye.
Ashaye, who spoke at the 2018 edition of the annual Business Outlook seminar organised by the CIIN in Lagos, described the 2018 budget tagged ‘Budget of Consolidation’ as largely a deficit budget.
According to her, from its deficit side, since government in the budget planned to spend N8.61 trillion while its expected revenue from all sources was estimated at N6.60 trillion leaving a funding gap of N2.1 trillion, government will need to borrow from local and international institutions to augment the expected shortfall.
She said given that government borrowing is risk free, financial institutions might be more inclined to lend to the government than the organised private sector.
According to her, inevitably, the private sector operators may borrow at a higher interest rate to finance their activities.
She argued that if this happens, their cost of doing business will rise and this might affect the prices of goods and services.
As it affects insurance business, the CIIN president, said it is common knowledge that higher interest rates imply lower borrowing and investments. With lower investments and decline in economic activities, the demand for the non-compulsory insurance products may be negatively affected adding that insurers cannot at present say the extent of this impact.
On the promising side, Ashaye, said the 2018 budget is not all about negative impact arguing that if the current price of crude oil, Nigeria’s main source of revenue, is sustained all year round, the need for borrowing by the government may reduce.
“This is based on the fact that the budget was predicated on US$45 per barrel whereas, the price since the beginning of the year has been above US$60.00. With higher revenue, Nigerians should expect better implementation of the budgetary provisions, she said.
On the side of benefit to insurers, Ashaye, said considering the fact that the government has allocated N181.19billion to the payment of pensions and gratuities of public servants while N15billion has also been set aside to meet MDAs’ life assurance premium obligations, the insurance sector should experience increased business momentum. She said on the whole, the insurance industry, has more to cheer from the budget.
She therefore urged insurers as risk managers, to open their inner minds and take business decisions that will help them reposition the industry in the unfolding 2018 business year.
The CIIN Business Outlook seminar, was initiated not only to beam searchlight on the economic and business issues that are likely to engage most captains of Industry and other business leaders in the new business year but also, to provide opportunity for the institute’s members to enrich their knowledge of happenings in their environment.
The theme of the 2018 edition is “Economic Policies of the Government in 2018: Issues, Challenges & Prospects for the Insurance Industry”.