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NIGERIA
Business market Intelligence
AXA CORPORATE SOLUTIONS
International Network Department
May- 2014
Recommendations
Key country facts:
K
Nigeria is most populated country in Africa. With a growth GDP above
7% and a decreasing inflation the country is booming economically
speaking. However, Nigeria is over dependent on oil exports (95% of the
total exports); it endangers its good economical state and future growth.
In addition, the country is still very poor (84,5% below poverty line) and
the wealth remains concentrated in a few people.
Country risk assessment:
K
Despite the war declared by the government against terrorists, the
situation is getting worst, the sect Boko Haram strikes the country with
violent terrorist attacks and kidnappings. Nigeria’s dependence on oil
exports, the high degree of corruption and the insecurity can also
endanger investments. However, its economic growth, the low level of
foreign debt and the quality of its banking system are assets for
investors. In addition, insurance risks are moderate (for S&P). Its is a
very interesting country and economy but still unstable and insecure,
especially in the North.
Regulation:
K
Cash before cover country with a strict control of the National Insurance
Commission (NAICOM). Fronting is generally prohibited with therefore
low reinsurance cessions.
J
Key country data:
K
Nigeria is now the first economy in Africa in terms of GDP and has a
strong overall economic growth. However, considering GDP per capita
Nigeria is below South Africa and Angola. Its petroleum exports maintain
a positive balance of payments. Finally FDI remains high, especially in
the mining and oil sectors. Future growth will be linked to oil exports and
to modernization and diversification of the global economy to decrease
its dependence on oil.
Insurance Market:
J
The market is growing and is composed by a very important number of
players. The market penetration is low regarding other African economic
powers. Globally it is an interesting market, one of the biggest in Africa.
Good historical and prospective profitability.
Local Partner (Leadway):
J
Occasional partnership with Leadway with a few accounts. Strong
company, leader of the Nigerian market with more than 10% of market
share.
Recommendations:
Nigeria, as the new economic leader in Africa, cannot be ignored in a global strategy of expansion in Africa. It is still a risky country in
which terrorist groups like Boko Haram endanger the security, especially in the North. The insurance market is controlled by a strong
regulator and the rule of law seems to be followed in this sector. AXA Corporate Solutions has just started an occasional partnership with
a local company: Leadway. It is the leader on the Nigerian market, and the collaboration is stable. Recommendations are to strengthen the
partnership and follow up the situation, especially regarding terrorism.
Key country
facts
Key country
data
Country risk
assessment
Insurance
Market
Insurance
Regulation
Local partner
analysis
Analysis:
Country- General information (Source: CIA factbook)
LARGEST CITIES:
Lagos
(10.203 million)
Kano
(3.304 million)
Ibadan
(2.762 million)
POPULATION:
173,9 million inhabitants (7/240 countries)
Change rate 2013 (Oanda) per EUR
224,7 for 1 euro
ABUJA (capital)
(1.857 million)
Exports and imports (Source: AXCO report)
EXPORTS:
petroleum and petroleum products 95%, cocoa, rubber
MOST IMPORTANT EXPORT
DESTINATIONS:
US
(16.8%)
India
(11.5%)
Netherlands
(8.6%)
machinery, chemicals, transport equipment, manufactured goods, food and live
animals
IMPORTS:
MOST IMPORTANT SOURCES OF
IMPORTS
China
(18.3%)
US
(10.1%)
India
(5.5%)
Nigeria is most
populated country in Africa. With
a growth GDP above 7% and a
decreasing inflation the country is
booming economically speaking.
However,
Nigeria
is
over
dependent on oil exports (95% of
the
total
exports)
and
it
endangers its good economical
state and future growth. In
addition, the country is still very
poor (84,5% below poverty line)
and
the
wealth
remains
concentrated in a few people.
Main
contributors
to GDP
(CIA
Factbook):
26%
31 %
agriculture
industry
services
43%
General overview (Source: IMF and World Bank)
2011
Gross domestic
product growth (%)
Inflation, average
consumer prices
(%)
Population
(million)
Current account
balance (% of GDP)
2012
2013
2014
2015
Quick Facts
GDP per capita (CIA) 2013
7,4
6,6
6,3
7,1
7,0
Poverty ratio at $2 per day in 2010(World Bank)
Life expectancy (year) (World Bank) in 2012
10,8
12,2
8,5
7,3
7,0
160,3
164,8
169,3
173,9
178,7
3,5
7,7
4,7
4,9
4,0
HDI* (UN) (value/rank)
Next election (Axco)
*: Human Development indicators (including: Life
expectancy, GDP per capita and level of education)
2800
84,5%
52,6
0,5/152
2015
Key country
facts
Key country
data
Country risk
assessment
Insurance
Market
Insurance
Regulation
Local partner
analysis
Source: World Bank
Current account balance, % GDP
GDP % Growth, annual
14.00
20.00
12.00
10.00
10.00
Nigeria
0.00
2010
2011
2012
2013
2014
2015
-10.00
South Africa
Chad
-20.00
Angola
Nigeria
8.00
South Africa
6.00
Chad
4.00
Angola
2.00
-30.00
0.00
-40.00
2010
Foreign direct investment, net inflows
(BoP*, current Mn US$)
10,000.00
8,000.00
2012
2013
2014
2015
External debt stocks, total (DOD, current Mn US$)
12,000.00
8,841.90
8,554.80
2011
7,101
6,048.60
10,000.00
8,000.00
6,000.00
10,076.50
9,008.80
6,847.80
7,271.10
2009
2010
6,000.00
4,000.00
4,000.00
2,000.00
2,000.00
0.00
0.00
2009
2010
2011
2012
Unemployment, total (% of total labor force) in 2012: 7,5%
*: Balance of payments
2011
2012
Key country
facts
Key country
data
Country risk
assessment
Insurance
Market
GDP Current billion US$
2010
2011
2012
9000
169,5
366,4
413,5
459,6
8000
South Africa
284
363,2
401,8
384,3
Chad
9,3
10,7
12,2
12,9
5000
75,5
82,5
104,2
114,1
4000
Angola
Local partner
analysis
GDP per capita current US$
2009
Nigeria
Insurance
Regulation
7000
6000
Nigeria
South Africa
Chad
3000
Angola
2000
500
1000
450
0
400
2009
2010
2011
2012
350
300
Nigeria
250
South Africa
200
Chad
150
Angola
100
50
2009
2010
2011
2012
Nigeria
1091
2294
2519
2722
South Africa
5654
7137
7790
7352
814
909
1006
1035
3989
4219
5159
5482
Chad
0
2009
2010
2011
2012
Angola
Analysis: Nigeria is now the first economy in Africa in terms of GDP and has a strong overall economic growth. However,
considering GDP per capita Nigeria is below South Africa and Angola. Its petroleum exports maintain a positive balance of
payments. Finally FDI remains high, especially in the mining and oil sectors. Future growth will be linked to oil exports and to
modernization and diversification of the global economy to decrease its dependence on oil.
Key country
facts
Key country
data
Country risk
assessment
Insurance
Market
COFACE 2013
Country rating
Weaknesses
Local partner
analysis
Transparency International 2013
D
Business climate
assessment
Strenghts
Insurance
Regulation
D
•
•
•
•
Substantial hydrocarbon resources and considerable agricultural potential
The most populated country in Africa (162 million)
Low foreign debt
Banking sector largely consolidate thanks to the reforms launched in 2009
•
•
•
•
•
Highly dependence on oil revenues (90% of exports, 80% of tax revenues)
Refining capacity very reduced, resulting in burdensome imports
Ethnic and religious tensions
Insecurity, corruption constraining the business environment
Unemployment, poverty, inadequate health and education systems
Worldwide governance
indicators comparison in 2013
(World Bank):
Control of Corruption
Rule of Law
France
Regulatory Quality
Angola
Government Effectiveness
South Africa
Nigeria
Political Stability and Absence
of Violence
Voice and Accountability
L
0
20
40
60
80
100
J
Rank
144/177
Score
25/100
Fitch
ratings
(2014-04-11)
Standard &
Poors’
(2012-11-07)
Moody’s
BB- (Stable)
BB-
/
Analysis: Despite the war declared by the
government against terrorists, the situation
is getting worst, the sect Boko Haram
strikes the country with violent terrorist
attacks
and
kidnappings.
Nigeria’s
dependence on oil exports, the high
degree of corruption and the insecurity can
also endanger investments. However, its
economic growth, the low level of foreign
debt and the quality of its banking system
are assets for investors. In addition,
insurance risks are moderate (S&P). Its is
a very interesting country and economy
but still unstable and insecure, especially
in the North.
Key country
facts
Key country
data
Country risk
assessment
Insurance
Market
Insurance
Regulation
Local partner
analysis
Source: AXCO
Market Penetration
Country
Non-life (P&C)
Total
%
Per capita
%
Per capita
Nigeria
0,51
6,27
0,68
8,46
South Africa
2,05
150,47
16,29
1195
Angola
0,56
28,75
0,88
45,17
Market
concentration
(% of top 5
players in
2010): 33,8%
Market size
Premium in NGN mn
Premium in USD mn
% of total market
Non-Life
Total market
149 042
201 284,36
991,64
1 339,23
74,05%
100%
Analysis: the market is
growing and is composed by a
very important number of
players.
The
market
penetration is low regarding
other
African
economic
powers. Globally it is an
interesting market, one of the
biggest in Africa. Good
historical and prospective
profitability.
Key country
facts
Key country
data
Country risk
assessment
Insurance
Market
Insurance
Regulation
Local partner
analysis: BODI
Source: AXCO
Fronting: In terms of the Insurance and Reinsurance Guidelines
issued by the National Insurance Commission (NAICOM) in May 2006
fronting is forbidden in respect of: fire insurance and reinsurance
business, motor insurance and reinsurance business, liability
insurance and reinsurance business, life insurance and reinsurance
business, accident insurance and reinsurance business, such other
insurance and reinsurance and business as the commission may
from time to time prescribe.
Cash before cover: YES, under the terms of the National Insurance
Commission (NAICOM) Guidelines on Insurance Premium Collection
and Remittance (NAICOM/CFI/DC/G/12/12) of 1 January 2013, all
insurance covers should be provided strictly on a 'no premium no
cover' basis.
Control of exchange: NA
Pools: NA
Non-admitted insurance: Non-admitted insurance is not permitted
because the law provides that insurance must be purchased from
locally authorized insurers. There are no exceptions specified in the
legislation to the general prohibition on non-admitted placements,
other than permission may be sought from the regulator to effect
such a placement.
Compulsory insurance: third party motor insurance, builders'
liability, property owners' liability and healthcare providers'
professional indemnity cover
Premium taxes: NA
Retentions: There are no statutory limitations on retention levels.
Insurance legislation
Insurance legislation: Insurance Act, No 1 of 2003 repealed and
replaced Insurance Decree, No 2 of 1997. The legislation deals with,
amongst other things, the registration and operation of insurers
and insurance intermediaries. The act applies to both life and nonlife classes
Regulator: National Insurance Commission (NAICOM)
It is part of the Federal Ministry of Finance and was formed in
accordance with National Insurance Commission Decree, No 1,
1997. It also sets standards for the conduct of insurance business,
approving premium and commission rates and regulating
transactions between insurers and reinsurers both inside and
outside of Nigeria. The commissioner has power to wind up, put
into receivership or withdraw licenses from offending companies.
Analysis: Cash before cover country with a strict control of the
National Insurance Commission (NAICOM). Fronting is generally
prohibited with therefore low reinsurance cessions.
Key country
facts
Key country
data
Country risk
assessment
Insurance
Market
Local
partner
analysis
Insurance
Regulation
SOURCE:
LEADWAY
Founded in 1970, Leadway Assurance Company Ltd - Leadway is a composite insurer.
Leadway is 81% Nigerian-owned and 19% owned by the International Finance Corporation.
In 2010 the company had a non-life market share of 10.35% and a life market share of
5.06%.
3 policies with Leadway today
Rating by AM Best: BA composite company underwriting all classes of insurance business.
The Company has enjoyed a steady growth in premium Income and total assets, which
currently stands at over N 30.5 billion (Thirty billion five hundred million naira) and N 66.3
billion (sixty six billion, three hundred million naira) respectively as at December 31, 2012.
Financial analysis
Turnover (M of NGN)
2012
36920,5
Turnover (M€)
Combined ratio
164
Net Result (M€)
42,3%
Analysis: Occasional partnership with Leadway with a few
accounts. Strong company, leader of the Nigerian market with
more than 10% of market share.
57,9
ROE
109%
Assets (M€)
295
Invest /
Assets
21%
Equity /
Premim
Reserve /
Premium
32%
Financial rating: BB-
7%
Appendix - Sources
Page
Source
Comments
Axco
Worldbank
http://data.worldbank.org/
Transparency International
http://www.transparency.org/cpi2012
CIA factbook
https://www.cia.gov/library/publications/the-world-factbook/
Coface
http://coface.com/
IMF
http://www.imf.org/external/data.htm
Appendix - Definitions
Gross domestic product, constant prices (Percent change)
Annual percentages of constant price GDP are year-on-year changes; the base year is country-specific . Expenditure-based GDP is total final
expenditures at purchasers’ prices (including the f.o.b. value of exports of goods and services), less the f.o.b. value of imports of goods and
services. [SNA 1993]
Inflation, average consumer prices (Percent change)
Annual percentages of average consumer prices are year-on-year changes.
Unemployment rate (Percent of total labor force)
Unemployment rate can be defined by either the national definition, the ILO harmonized definition, or the OECD harmonized definition. The
OECD harmonized unemployment rate gives the number of unemployed persons as a percentage of the labor force (the total number of people
employed plus unemployed).
Current account balance (Percent of GDP)
Current account is all transactions other than those in financial and capital items. The major classifications are goods and services, income and
current transfers. The focus of the BOP is on transactions (between an economy and the rest of the world) in goods, services, and income. The
current account balance is defined by the sum of the value of imports of goods and services plus net returns on investments abroad, minus the
value of exports of goods and services, where all these elements are measured in the domestic currency.
GNI Index (GNI per capita, Atlas method current US$)
GNI per capita (formerly GNP per capita) is the gross national income, converted to U.S. dollars using the World Bank Atlas method, divided by
the midyear population. GNI is the sum of value added by all resident producers plus any product taxes (less subsidies) not included in the
valuation of output plus net receipts of primary income (compensation of employees and property income) from abroad