Expert Points Way Forward for Insurance, Pension Sectors’ Contributions to $1tn Economy

Ebere Nwoji

In the face of rising inflationary trend accompanied by high exchange rate of naira to dollar with federal government’s projection of building $1 trillion economy by the year 2030, insurance and pension sectors have been asked to take five major steps in their search for ways of making meaningful contributions. 

The steps, the expert said, are: technological advancement, improved capitalisation, development of innovative financial products to meet the changing needs of individuals, involvement in capital market development and investment in infrastructure and other key sectors.

The Managing Director /Chief Economist, Analysts Data Services and Resources, Dr Afolabi Olowookere, stated this, while delivering key note address at the 9th Annual conference of the National Association of Insurance and Pension Editors (NAIPE) in Lagos.

The conference which has the theme, “Towards A $1 trillion Economy: Roles of insurance and Pension Sectors,” served as a rally point for Chief Executives of insurance firms and Pension Fund Administrators (PFAs) to sit together, examine their contributions to the GDP of the economy and point out their next line of action to play key role towards the achievement of the Federal Government’s dream.

Addressing the audience, Olowookere, noted that in terms of GDP sectors performance, the leading contributors to Nigerian outputs were Agriculture, ICT, Trade and manufacturing but that the finance and insurance sector which contributes 6.57 per cent of the GDP has continued to be the major driver of the economy as well as the fastest growing sector in recent times.

He said though various sectors of the economy have had fair share of negative impact of the prevailing high inflationary rate and high exchange rate of dollar to naira, which affected their contributions to the economy, insurance and pension should embrace the aforementioned key factors to remain relevant.

According to him, insurance and pension sector operators need to adopt technological innovations such as Artificial Intelligence AI, machine learning and blockchain to improve research, portfolio management and back – office operations.

“By improving efficiency and reducing costs, they can offer better returns to contributors and attract more funds, driving economic growth through smarter and more sustainable investments”, he said.

In terms of capitalisation,  Olowookere said insurance and pension sectors could expand their assets by encouraging more Nigerians to save for retirement and underwriting higher portfolio risks.

He said, “As life expectancy increases and the population builds wealth, these funds will grow, providing more capital for long-term investments in the economy.”

Insurance sector in particular was charged to increase its operating capital to build more premium and profit.

He noted that funds from the two sectors were significant institutional investors in the capital market, adding that by increasing their involvement in equities, bonds, and other financial instruments, they could help deepen the capital markets and provide liquidity.

He also said the two sectors could serve as institutional investors, allocating a portion of their assets to national development projects such as roads, bridges and energy infrastructure.

According to him, they can also invest in priority sectors like agriculture, technology and healthcare.

Olowookere said the projected total assets of insurance sector under the $1 trillion GDP fell from $3.9 billion in 2023 to $2.2billion in 2024 due to naira depreciation.

According to him, the baseline projection is for Nigeria’s GDP to reach $681.9 billion in 2030 from $265.4 billion in 2024.

“At the baseline rate, total assets of the insurance sector will be expected to rise to $6.4 billion in 2030. However if the government target of a $1 trillion GDP is met, insurance total asset is projected to reach $ 20.5 billion,” he said.