In 2022, the insurance index emerged as one of the worst-performing indices on the Nigerian Exchange Limited (NGX) trading floor, followed by the consumer goods index. According to The Punch, the insurance index closed 2022 at 11.99 per cent, which has been attributed to a lack of confidence in the stocks present within the insurance sector. Some market analysts also believe the poor performance resulted from the suspension of the insurance sector recapitalisation exercise by the National Insurance Commission (NAICOM), which made foreign investors exit the market.
Fortunately, the insurance index has seen an impressive recovery in 2023 as the insurance sector improved its value within the NGX.
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The presence of insurance in Nigeria
Generally, Nigeria is a nation that has a low insurance culture due to the unstable economy. Most residents do not have access to avenues that could make them more knowledgeable about what insurance policies can do for health, safety, business, and financial security. Additionally, the distribution of insurance across the country could be potentially expensive and discouraging, limiting the opportunities for insurance companies.
Due to the lack of overall support and engagement with the insurance sector, some analysts attribute its poor performance in 2022 to their inability to pay shareholders’ dividends. This led the NAICOM to take action and suspend the insurance sector recapitalisation, ensuring that companies can redeem their claims and avoid failure to announce their annual dividend payout to shareholders. As a result, their stocks declined significantly in the previous year despite closing at +4.50 per cent in 2021 and +50.61 per cent in 2020.
Gradual recovery and growth
As of 2023, the insurance penetration in Nigeria is still low, but there has been a significant increase in insurance premiums that helped improve the results of insurance companies, which also helps improve investors’ confidence. By June 2023, the insurance index saw a 49.5 per cent increase supported by a positive trajectory of monthly gains. It is not the best-performing sector, but it has made significant progress compared to last year. Additionally, Business Day reported that companies like Great Nigeria Insurance (GNI) recorded an N10.2 billion gross premium that showcased its profitability and helped bolster investment opportunities for insurance indices.
In line with this, investors are further encouraged to invest in insurance indices, as they can access reliable platforms to monitor their assets. This is highlighted by MetaTrader4, where traders can conveniently access insurance indices and efficiently conduct market execution. These platforms make it easier to monitor assets across more than 200 instruments, including forex, cryptocurrencies, stocks, and energies, improving the chance that insurance stocks can see more volume and traffic to attract investors. With Nigerian insurance companies also performing stronger, having the right platforms can help investors track their stock movement better and easily execute trades if the numbers are promising.
Future opportunities for the insurance sector
Considering the upward trend for the investment sector, especially regarding its stock market performance, it can be expected that they can make further progress with their success. Under President Bola Ahmed Tinubu, the current administration is determined to reform the country’s economy by enacting policies that strengthen trade activity within Nigeria, which can positively impact investment opportunities for insurance companies. In line with this, the online trading platform SecondSTAX recently launched in Nigeria, which makes it easier for investors to expedite African transactions and have a smoother trading experience.
Furthermore, our post “NEC Orders CBN To Spend $3Bn Loan To Stabilise Economy” details that the government is also working to strengthen the naira, which can help residents have more financial security and see the appeal of participating in insurance culture. Given the naira’s current devaluation, this presents significant opportunities for Nigerian citizens and foreign investors looking to gain financial growth within local currency and businesses.
