Professionals under the auspices of the Nigerian Institution of Estate Surveyors and Valuers (NIESV) have bemoaned the Lagos State Government for adjusting property values in 2018 upward without valuation exercise for the reenacted Land Use Charge (LUC).
Besides, the institute raised concerns over other areas of the law, which include the relief rate (RR), Land Use Charge (LUC) rate and the depreciation rate (DR) to arrive at the amount payable under the new property tax.
Speaking at a meeting between the organised private sector (OPC) and Lagos government officials, Chairman of NIESV, Lagos branch, Mr. Olurogba Orimolade, appealed to the government to conclude the valuation exercise before adjusting assessment figures based on valuation.
To enhance further engagement of the institute, Orimolade suggested an upward review of the relief rates to accommodate provision for maintenance cost and other outgoings.
He said: “It must be noted that most of the payers can only pay from the property income, therefore the land use charge rate should take cognisance of rental trend, which in most locations is either stagnant or going southwards.
“We will suggest a holistic review of the charge rate to take account of the above, which speaks to affordability.”
The new Land Use Charge Law (LUCL) 2018, which applies to real and landed property in the state, seeks to consolidate all property and land-based rates/charges into a single property charge and sets modalities for levying and collection of land use charge in the state.
Orimolade described the rates adopted for depreciation as “most inappropriate,” arguing that the rate could be as high as 40 per cent depending on the age and repair state of the property.
“Depreciation consists of elements of obsolescence and dilapidation.”
He said that it was also observed that rise in the rates had significant cut into the annual rental income, which could be generated from some properties.
“This makes payment of this annual charge (LUC) difficult. This could also lead to increase in rents by landlords to meet up with the tax weight while being a disincentive for new real estate developments,” the Lagos’ NIESV boss said.
Orimolade called on the state government to have a mechanism to limit the amount payable within highly reduced percentage of the net annual rental income on assessed property as a benchmark.
For sake of transparency and best practices, he urged that when valuation is concluded, a valuation list should be produced and displayed in each local government area for all stakeholders to see.
He said: “This will reduce perception of arbitrariness and increased compliance. It makes it easier for stakeholders to compare their assessment with that of neighbouring properties.
“We have articulated key suggestions and grey areas with contradictory provisions, which we would be recommending to the government when we meet for dialogue.”
He stated that the association was aware of the government’s efforts to commence enumeration exercise in the state, describing it as a “welcome development.”
He added that the process would help the government obtain real values of the property while providing necessary data on housing stock in the metropolis.
Report: CBN trying to force banks to lend, not buy bills
Nigeria’s central bank barred banks from buying bills for their own accounts at an open market auction held on Thursday, a move intended to force them to lend rather than invest in government debt, traders said on Friday.
The bank is stepping up a campaign to get credit flowing. Last week, it limited the size of interest-bearing deposits it would hold for banks, the latest in a series of measures aimed at reviving an sluggish economy
The central bank, which had not issued market stabilisation bills for about a week before Thursday’s auction, told banks bids must be backed by customer demand. In the past, banks have bought government debt rather than assume risk by lending.
It was unclear if the order applied to Thursday’s auction only. Banks can still purchase bills on the secondary market, traders said.
At Thursday’s open market auction, the central bank offered 75 billion naira ($245.14 million) of bills, drawing demand totalling 475 billion naira for the various maturities. The bank sold one-year bills at a yield of 12.25%.
A trader said Thursday’s auction was aimed at non-bank investors, adding that the central bank has considered offering bills directly to foreign investors to support the currency.
STRUCTURAL REFORMS NEEDED
The central bank had been issuing securities at high yields to mop up naira, a policy it maintained for more than two years to attract foreign inflows into bonds and support the naira.
It was unclear which option the central bank wants to pursue: boosting credit flow locally or maintaining a stable currency in the face of high inflation and dollar shortages, reports Reuters.
At its last rate meeting in March, the bank cut rates by 50 basis points for the first time since November 2015, saying it wanted to signal a new direction. Analysts expect another 50-bp rate cut on Tuesday.
Bankers doubt the measure will do much to boost lending unless credit risk is addressed through reforms.
“I’m not quite sure this is an effective way of getting banks to put their balance sheet on the line to areas where they clearly perceive risk,” one banker told Reuters. “The central bank wants to drive growth in the economy without structural reforms, which is counter-productive.”
President Muhammadu Buhari won re-election in February and has pledged to get the economy growing again. But he has failed to set up a cabinet months after gaining a second term.
Analysts said recent policies aimed at boosting loans to revive the economy could have a knock-on effect by lowering yields to unattractive levels for foreign investors, which could weaken the naira.
Cashew as catalyst for Nigeria’s agric potential
The untapped potentials of cashew once again came to light at the recent annual general meeting (AGM) of National Cashew Association of Nigeria (NCAN) where it was disclosed that the country’s cashew production hit 260,000 tonnes this year from 90,000 tonnes in 2011. Taiwo Hassan reports
I deally, the rebirth of the country’s agriculture under the current administration of President Muhammadu Buhari has been applauded in many quarters because of the attention the administration gave to agriculture to re-jig the country’s non-oil sector.
Similarly, the Central Bank of Nigeria (CBN) has also played a key role towards revamping the moribund agriculture sector by rolling out intervention funds that have helped to galvanize and turn around the sector for steady growth and development.
However, one of the leading agric commodities, cashew, has been a money spinner for the country’s economy following the rate of sustainable development being achieved in terms of production, exports and accrued revenue.
Interestingly, the turnaround in the country’s cashew sector has seen the commodity being listed among non-oil exports, where the Federal Government intends to generate about $30 million.
Other agric commodities in the export list include ginger, cocoa products, hibiscus, sesame seeds, columbite for use in alloys, monalite for use in engineering and zircon.
Speaking during a meeting with President Buhari in Abuja recently, the Executive Director/Chief Executive Officer of Nigerian Export Promotion Council (NEPC), Segun Awolowo, disclosed that Nigeria, within the next 10 to 15 years, could earn about $150 billion from non-oil revenue sources.
Particularly, he said that the successful implementation of a zero oil plan would significantly increase foreign exchange earnings for the country.
“The zero oil plan is about raising production and productivity. We identified 22 sectors where we can earn foreign exchange apart from oil. We are hoping that in the next 10-15 years we will be able to raise $150 billion from sources outside oil,” Awolowo said.
In fact, cashew was identified as juicy crop in non-oil export because of its high return on investment.
This in return has buoyed the country’s non-oil export revenue for this fiscal year.
In the same vein, the Federal Government also announced that it was planning to get more cashew nut processing machines nationwide to enable the country double export earnings from $800 million to $1.7 billion.
A former Minister of Agriculture and Rural Development, Chief Audu Ogbeh, who dropped the hint, stated that government was already thinking of completing the building of cashew nut processing facilities nationwide in order to boost processed cashew nut export and earn more foreign exchange.
He explained that government would be working with cashew nut processors and other relevant associations in the country to ensure the success of the facility in order to bolster production.
He described cashew nut as one of the key non-oil exports that the current administration is looking at in order to increase its revenue base, adding that its contribution to national export earnings had been on a steady increase since 2015.
The National Cashew Association of Nigeria during its annual general meeting in Lagos stated that Nigeria’s cashew production had hit 260,000 tons this year from 90,000 tons in 2011.
However, the members attributed the increase to the Babatola Faseru-led executive’s efforts to promote cashew production in the country.
NCAN said it had been able to improve local, national and international image for cashew brand.
The association said it focused on the key gaps inhibiting growth in the business that will help to rebuild the sector’s potential, stimulate growth, and enable smallholder farmers to raise their incomes and yields, while creating jobs for young people and raising income for women.
Nigeria is rated the fourth largest producer of cashew nuts in Africa and seventh in the world with the bulk of its cashew nuts and cashew kernels exported to Vietnam and India.
NCAN then called on government to allot funds and create schemes to increase cashew nut production.
According to the association, cashew is a major agricultural produce and efforts have been made to boost farmers’ productivity and improve cashew production practices.
In one of the fora in Abuja, the central bank revealed that it would massively support farmers to boost the production of cashew, tomato, cocoa and palm oil across the country this year.
CBN Governor, Godwin Emefiele, said the move was in line with Federal Government’s quest to attain self-sufficiency and reduce food imports.
Already, the dynamics of the Central Bank of Nigeria’s Anchor Borrowers’ Programme in the lives of many farmers in the country and the economy in general cannot be quantified.
In fact, the ABP, which is part of the CBN’s development agenda, is not only targeted at creating millions of jobs, but it is also meant to lifting thousands of small holder farmers out of poverty.
Under the programme, the CBN had set aside N40 billion out of the N220 billion Micro, Small and Medium Enterprise Development fund given to farmers at single digit interest rate.
Despite the progress recorded in the country’s cashew sector, funding is still posing the biggest challenge for exporters of the commodity in the country.
Affirming this concern, the NCAN president noted that fund was needed in order to ensure smooth export of cashew in the country, saying that the association was doing everything possible to ensure that cashew exporters do not encounter funding challenges.
According to him, Nigerian realised about $813.05 million (N284.5 billion) in foreign exchange from the export of cashew between 2015 and 2017.
Fasheru explained that the contribution of cashew to national export earnings had been on a steady increase since 2015.
The NCAN president disclosed that the commodity had become a source of income for local farmers, who have benefited immensely from exporting the product.
For instance, he said export earnings rose from $152 million in 2015 to $259 million in 2016 and $402.05 million in 2017.
According to him, Nigeria’s major trading partners are from Vietnam, India and the United States.
He stated that these countries had been the destinations for Nigeria’s cashew export in recent times.
While commending the commitment of the Federal Government to repositioning the economy through cashew production, he stressed that the Nigerian brand of cashew nuts was one of the most preferred globally.
Based on the forgoing, NCAN members are calling on the Federal Government to address some of the problems affecting the production and export of cashew in the country in order to guarantee steady production and revenue generation for the economy.
NAMA boosts airspace safety with new VHF radios
Nigerian Airspace Management Agency (NAMA) has boosted safety of Nigerian airspace, as the agency commences installation of 14 new Very High Frequency (VHF) radio sites to ride on the new VSAT network.
Managing Director of NAMA, Capt. Folayele Akinkuotu, expressed gratitude to the Federal Government for its support and intervention leading to the final clearance of the agency’s VSAT equipment at the Apapa port.
Not a few believe that the installation of the multi-million dollar equipment would help to reduce the occurrence of blind spots in the country’s airspace.
Akinkwuotu assured airspace users and the flying public that the Nigerian airspace remained safe, adding that NAMA would continue to upgrade its air traffic management services and procedures to guarantee safety of air navigation in the country at all times.
Since 1998, it has been more of rhetorics than actualisation of yet-to-be-completed Aeronautical Information Service (AIS) automation. The wait seems to have ended following the clearance and deployment of the facilities.
This was further worsened by the inability of NAMA to clear the over N1 billion facilities that are still trapped at the seaport.
At the celebration of the 2019 World AIS Day in Lagos, Akinkuotu said the Nigeria Customs service (NCS) was asking for N100 million before the clearance of the equipment and had refused to grant waiver for its release.
Akinkuotu, represented by the Director Operations, Mr. Lawrence Pwajok at the event, which was themed: “The Benefits of Automation to Aeronautical Information Management,” expressed fear that the equipment may rust and become obsolete if not given an expedited clearance.
He said: “Clearing of these goods and paying customs duties cost hundreds of millions because these are very expensive equipment, we must find funds for doing this clearance and it must be done urgently because the equipment cannot remain in the ports at the risk of bad weather and anything could expire there and we will run the risk of starting all over again.”
Akinkuotu lamented that the agency was back to square one again, dashing the hopes of the AIS personnel in the automation of the AIS in the country after 10 years of foot dragging on the project.
The NAMA MD, however, stated that the setback would not affect the automation of the AIS, as the Minister of State for Aviation, Hadi Sirika, was working tirelessly to ensure that the project was implemented.
He assured AIMAN that management was working hard to ensure more AIS officers are trained ahead of the completion of the automation system, adding that efforts were on to provide conducive working environment for the officers to carry out their job effectively towards ensuring safety.
Akinkuotu explained that the agency was asked not to include the clearance fees for the equipment in last year’s budget and assured that as a government agency, the equipment would be granted waiver.
“The project did not envisage that we will have to pay for clearing, it was two years ago we were at the National Assembly with the former MD and the National Assembly insisted we should not pay for cost for clearing of government equipment in the budget, they say you can get a waiver from customs and from the ministry of finance and from the CBN and you don’t need to pay.
The NAMA boss told this newspaper that the agency had equally planned to digitalise the nation’s Aeronautical Information Service (AIS) having received a bolster, as the agency recently commenced the installation of prefabricated pilot joint briefing offices nationwide.
He disclosed that the installation team, which has completed work at Murtala Mohammed International Airport Lagos, had proceeded to another airport and is expected to continue the installation in 21 airports and three aerodromes nationwide.
Analysts: Nigeria rakes in $750m from Sesame seeds yearly
As global sesame seed consumption is rising exponentially due to its health and nutritional benefits, Nigeria is generating over $750 million in revenues yearly from the product.
This was disclosed in a report by analysts from Bismark Rewane-led Financial Derivative Companies (FDC).
Specifically, they said Nigeria remained the largest producer of sesame seed in sub-Sahara Africa (SSA) and fourth in the world.
“Nigeria produces 550,000 metric tonnes (mt) of sesame seeds per year, generating over $750 million in revenue,” the experts said.
Despite the fact that Nigeria has the potential of increasing its production by 82 per cent to one million metric tonnes, analysts pointed out that sesame seed production in the country was constrained by quality and economies of scale.
The FDC report stated that total global production of sesame seeds in 2017 was estimated at 5.53 million tonnes, amounting to $4.15 billion.
“Global output fell sharply by 9.5 per cent compared to 2016. Global price of sesame seeds increased in 2018 and is now trading at a range of $1,550- $1,650/tonne,” the experts said.
Countries such as Tanzania, Myanmar and India are top world’s producers of sesame seeds, while Tanzania, China and Sudan are global top consumers.
Sesame seeds are being used for oil, flour, pastry garnishing, sushi and salad, among others.
Currently, the nation produces 9.95 per cent of total global output and is ranked fourth largest in the world.
Nigeria produces sesame for exports to Japan, China and Turkey and those countries process it as a major ingredient in cooking oil.
According to the report, export earnings from sesame seed in Nigeria was in excess of $200 million and it is produced nine states of the federation, mainly Jigawa, Benue, Nassarawa, Yobe, Kano, Gombe, Plateau, Katsina and Kogi.
However, analysts noted that pastoral conflicts in major producing states were weighing on output of sesame seeds in the producing states.
Meanwhile, Nigeria produces 0.11 per cent of global steel (less than two million metric tonnes), but imports five million tonnes yearly, according to analysts.
They pointed out that efforts to revive the Nigerian steel industry were already under way, but that competition against increasingly low cost steel imports from China has formed the biggest threat confronting every potential investor.
The report stated that Nigeria was a fringe player in steel production with output of less than two million tonnes.
It said: “The nation boosts 13 rolling mills, seven mini mills and two integrated steel companies.
“Delta steel plant, which produced two metric tonnes (mts); and Ajaokute steel – 5.7mts are potential game changer for Nigeria.”
Major rolling mills in the countries are Katsina, Jos and Osogbo, while steel import demand was estimated at five million tonnes, amounting $3.3 billion.
“Nigeria’s total global production of steel in 2018 was 1.8billion tonnes, amounting $41.18trillion,” analysist said.
Steel is used for the construction of buildings, bridge, railway and automobile.
World’s top producers of steel include China, European Union, India, Japan and United States; while top consumers are China and EU.
Labour seeks Nigeria’s alignment with climate change pact
The Nigeria Labour Congress (NLC) has thrown its weight behind the Federal Government in its effort to align with the United Nations by signing the action climate change agreement.
President of NLC, Comrade Ayuba Wabba, disclosed this in a letter signed addressed to the Secretary to the Government of the Federation.
NLC described the agreement as a commitment to support a just ecological transition by formulating national plans for a just transition, creating decent work as well as green jobs for the citizens.
According to the NLC, the process involves creating mechanisms of inclusive social dialogue such as assessing employment, social and economic impacts of ecological transition and green jobs potential; implementing skills development; designing innovative social protection policies; increasing transfer of technology and knowledge to developing countries as responsible investment.
Wabba stated that the NLC looks forward to being partners with government in the implementation of these commitments.
The letter noted that the UN Secretary-General is calling on all leaders to come to New York in September with concrete, realistic plans to enhance their nationally determined contributions by 2020, in line with reducing greenhouse gas emissions by 45 per cent over the next decade, and to net zero emissions by 2050.
DMO to auction N145bn worth of bonds, July 24
The Federal Government has offered for subscription by auction N145 billion worth of bonds in its July 24 auction, the Debt Management Office (DMO) has said.
The offer circular obtained from its website on Thursday stated that it would sell N40 billions of a five year re-opening issue maturing in April 2023 at 12.75 per cent.
It would also sell N50 billion 10 year re-opening bond to mature in April 2029 at 14.55 per cent, and another N55 billion 30 year re-opening at 14.80 per cent to mature in April 2049.
According to DMO, a unit of sale is N1, 000 per unit, subject to a minimum subscription of N50 million and in multiples of N1, 000 thereafter.
The DMO explained that the bonds are backed by the full faith and credit of the Nigerian Government, with interest payable semi-annually to bondholders, while bullet repayment would be made on maturity date.
Nigeria issues sovereign bonds monthly to support the local bond market, create a benchmark for corporate issuance and fund its budget deficit.
Infrastructure upgrade: AfDB team meets Fayemi in Ekiti
The African Development Bank (AfDB)’s team of technical experts on Thursday met with Ekiti State Governor, Dr Kayode Fayemi and his team in Ado-Ekiti in furtherance of ongoing talks between the Bank and the state government on support for the upgrade of its infrastructure.
The meeting, which took place at the Governor’s Office, Ado-Ekiti, according to a statement, was a follow up to an earlier one at the AfDB headquarters in Abidjan, Cote d’Ivoire, last month.
According to a press release issued by the Chief Press Secretary to the Governor, Olayinka Oyebode, some key areas the Bank is considering technical and financial support for Ekiti State Government include the knowledge zone, agriculture development, transportation, Infrastructure and governance initiatives, SMEs and job creation.
Target projects include Ado Ekiti- Akure road, Agro-allied cargo airport, the Ekiti Knowledge Zone (a smart city to promote a knowledge economy), Agriculture Processing Zone, Power Project and job creation.
AfDB’s Senior Director for Nigeria, Ebrima Faal, who led the Bank’s team to the meeting, said it was important for the state to do something about its infrastructure deficit, adding that the state had taken the right step by seeking partnership with the Bank.
Faal, who said the AfDB had a good working relationship with Governor Fayemi during his first term in office and when he served as Minister of Mines and Steel Development, described the Governor as a development-focused leader.
He restated the earlier position of AfDB’s President, Dr Akinwumi Adesina, that the development bank would partner with the state in its desire to upgrade its infrastructure.
“We have been working with Dr Kayode Fayemi right from his first tenure and when he served as Minister of Mines and Steel Development. There is no doubt that he is a development-focused leader. We will support Ekiti State as the President of AfDB, Dr Akinwumi Adesina, had earlier assured”, Faal added.
In his remarks, Governor Fayemi said the state needed to upgrade its infrastructure and invest in agric business, which will in turn provide jobs for its teeming population of youths, which he put at 75 percent of the state’s total population. He added that setting up a smart city to promote knowledge economy is also crucial to the administration.
“We have aligned our priorities to the AfDB’s priorities and our plan is to make Ekiti a destination of choice for her citizens and all those who will like to live, work and invest in the state,” the Governor added.
“To achieve this, we need to invest heavily in infrastructure. We want to fix the roads, have our small Agro-allied cargo airport that will aid agriculture and open our landlocked state to domestic and international markets and ultimately create jobs that our state urgently needs for its vibrant and educated youth population”.
Fowler lists benefits of new JTB TIN registration system
The Tax Identification Number (TIN) Registration System and Consolidated National Taxpayers Database introduced by the JTB will improve the efficiency and output of the entire tax administration process and provide convenience to taxpayers and tax authorities.
Chairman of the Joint Tax Board (JTB), Mr. Babatunde Fowler, stated this yesterday during the South-west Flag-off ceremony of the new system, which was launched in Abuja on 1 July.
Fowler, who is also the Chairman of the Federal Inland Revenue Service (FIRS) stated this in Lagos, said the new system will ensure that taxpayers’ information are available whenever and wherever they need them.
The system, said Fowler, possesses the capability to integrate with relevant agencies and leverage on already captured data, deploy analytics to discover underlying and correlating trends and patterns that could lead to increased Internally Generated Revenue (IGR) for all tiers of government.
These agencies, he added, include the Corporate Affairs Commission (CAC), Nigeria Customs Service (NCS), Nigeria Immigration Service (NIS), Federal Road Safety Commission (FRSC), Central Bank of Nigeria (CBN) and the Nigeria Inter-Bank Settlement System (NIBSS), Nigeria Identity Management Commission (NIMC) and Nigerian Communications Commission (NCC),
“This would significantly reduce the burden of manual taxpayer information management and by extension grossly crash the cost of collection,” he said.
“The system is designed in such a manner that each taxpayer is assigned a unique and universal Taxpayer Identification Number (TIN) and it is now possible for any taxpayer to view, retrieve or update his/her tax profile from anywhere 24/7”.
The new TIN Registration System and its consolidated database of individual and corporate taxpayers have been designed to form the foundation upon, which the nation’s automated tax administration system is built.
In his opening remarks at the event, Executive Secretary, JTB, Sir Oseni Elamah, said the new system is a web-based solution that offers access to authorized users to initiate TIN request from the comfort of their homes/offices real-time online, verify their tax status and print their TIN certificate.
NSE slides to 26-month low, sheds N87bn
Bearish sentiments on the Nigerian Stock Exchange (NSE) deepened further yesterday, as the market performance indicator (NSE-ASI) fell to 27,000 index points – the lowest in the last 26 months.
The unimpressive performance according to market watchers was driven by losses in all the sectors except Industrial goods, which closed high.
Similarly, market breadth closed negative, with 12 gainers as against 19 losers.
Consequently, the All Share Index (ASI) decreased by 178.31 basis points, representing a decline of 0.64 per cent to close at 27,864.49 index points from 28,042.80 points reported the previous day. Likewise, the Market Capitalization lost N87 billion, equally representing a dip of 0.64 per cent and closed at N13.579 trillion, from N13.666 trillion recorded the previous day.
Meanwhile, a turnover of 76.3 million shares exchanged in 2,653 deals was recorded in the day’s trading.
The premium sub-sector was the most active (measured by turnover volume) with 86.6 million shares exchanged by investors in 991 deals.
Volume in the sub-sector was largely driven by the activities in the shares of FBNH Plc and Zenith Bank Plc.
Banking sub-sector boosted by the activities in the shares of Sterling Bank Plc and GTB Plc followed with a turnover of 30.4 million shares in 345 deals.
Further analysis of the day’s trading showed that Conoil Plc topped the gainers’ table with 9.76 per cent to close at N20.25 per share, while Dangote Sugar Plc followed with 9.22 per cent to close at N11.25 per share. Sovereign Trust Assurance Plc gained 5 per cent to close at 21 kobo per share.
On the flip side, Berger Paints Plc and International Breweries Plc led the losers’ chart with a fall of 10 per cent each to close at N6.30 and N15.30 per share respectively. Seplat Petroleum Plc tailed with a loss of 9.43 per cent to close at N480.00 per share, while C and I Leasing Plc dropped by 9.17 per cent to close at N4.95 per share.
Premium: S’Africa’s $47.27 bn dwarfs Nigeria’s $1.09bn
Nigeria’s poor insurance outing has again been highlighted following recent global premium ranking report, which did not only place South Africa ahead in Africa, but also paled Nigeria’s 2018 premium posting into insignificance.
According to the report put together by Africa Magazine, a publication with bias for insurance pulse, South Africa came first in African market with $48.269 billion, representing several thousand percentage difference compared with Nigeria’s $1.009 billion.
At its annual general meeting (AGM) held in Lagos last month, Nigerian Insurers Association (NIA) put the industry’s total gross written premiums at 10.19 per cent increase to reach N400 billion ($1.09 billion) in 2018, compared to N363 billion ($999 million) in 2017.
The premium written, which is believed to be estimated in the meantime, represents another poor showing, considering the human and natural resources that abound in the country, a development that has compelled the regulator and operators to mull another round of recapitalisation as well as series of rebranding commitment.
Recently at the Africa Insurance Organisation (AIO) conference in Johannesburg, South Africa, it was revealed that Nigeria’s premium growth ticked negative alongside Algeria and Kenya, according to the 4th Africa Insurance Barometer.
The negative growth rate is amid $67.7 billion premium posted by the continent’s underwriters in 2018.
According to the survey, in Africa’s largest insurance markets, total real premium growth was positive in Egypt (+9.8 per cent), Namibia (+7.8 per cent) and Morocco (+3.0 per cent), stagnant in South Africa (+0.1 per cent) and negative in Nigeria (-10.5 per cent), Algeria (-2.8 per cent) and Kenya (-2.0 per cent.)
Lamenting the poor premium recorded at the AGM, the Chairman, NIA, Tope Smart, said the industry battled with a lot of negative factors, including poor operating environment, which the sector waded through during the year reviewed.
He also identified tax entanglement and poor power supply as factors, adding that frequent power outage had continued to be a major challenge to businesses in Nigeria.
According to him, failure to abolish or amend the CITA 2007 remained a huge burden to the insurance companies.
Section 16 of the company income tax requires insurers to pay tax on every claim that is up to 25 per cent of their gross premium, which they saw as double taxation.
Listing other factors, he said: “Growing herdsmen/farmers’ clashes across the country, insurgency and armed banditry in the north, rising cases of kidnapping, armed robbery and other violent crimes as well as communal clashes in some states all combined to negatively affect the bottom line of many insurance companies.
“Some of these initiatives include the insurance industry rebranding project, regulation on micro insurance, collaboration on financial inclusion, bancassurance guidelines and others, which will impact positively on the business of insurance companies.”
To fix the poor rating, the Commissioner for Insurance, Mohammed Kari believes that the on-going recapitalisation exercise will allow local insurers retain huge risks in the country, thereby, forestalling premium flight that will, in the long run, increase the profitability of the sector and its impact on the nation’s economic growth and development.
While stating that the recapitalisation is long overdue, as foreign exchange rate, he noted that asset replacement values as well as claims volume had increased in the last 12 years, adding that operating with the current capital base was putting insurance firms at risk.
He said insurance operators were fond of resisting recapitalisation exercise whenever the idea is mooted, saying that some insurers preferred to write huge risks in aviation and marine sectors, with small capital.
Speaking on the need for recapitalisation exercise at a time the country is transiting to Risk Based Supervision (RBS), he said there was no insurance industry all over the world that does not have minimum capital requirement, which is usually the entry point.
“All over the world, there is usually an entry point, which is the minimum capital requirement for an insurer to underwrite risk in a country,” he said.
“Other decisions, whether to increase the minimum capital or maintain it, are taken thereafter. So, even under risk based, the minimum capital still exists,” he said.
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