BY NKECHI NAECGE-ESEZOBOR—The federal Government has been charged to utilize borrowed funds 100 % for the purpose it is meant for, for the good of the industry and the economy at large.
They gave the charged on the sideline of just concluded 51st General Assembly of African Insurance Organisation,( AIO), conference held in Addis Ababa, Ethiopia, with the theme: “Balancing the Books: Africa’s Debt Problem. Why Does Country Debt Impact Insurers?.”
According to them, that public debt if not well utilized can lead to increased interest rates, reduced investment returns, and potential sovereign debt crises, all of which can negatively affect insurers’ financial health.
The chairman Boff & Company Insurance Brokers Limited, Babajide Agbaje,who spoke to BusinessTodayNG noted, that debt itself is not a bad thing especially when is used in isolation.
Agbaje said debt is used in businesses and in government to expand capital projects but they must be used welI, adding that anyone who wants to do any form of business or any expansion, needs debt on his portfolio.
“You can’t be so lucky to have all the money you need in the world. So debt is a good thing but unfortunately this is not so in most developing nations . You don’t borrow for consumption. You borrow to invest so that the investment will generate income, further return on investment to pay back the loan and the interest. So the problem we have in Nigeria, is that debt is not used in isolation. They bring in the money but it is not geared 100% towards what it should be for.
”If you remove corruption from debt, it would work but when corruptionenters and they take away 30, 40, 50, 60, 70, whatever percent they take away. How can 30% cover the 100% that you borrow for? So what is in there for insurance industry? Remember that the insurance industry benefits from government capital projects because they are the risk takers, backbone of the world economy. Once the economy expands as a result of capital projects, the insurance industry will expand too because you can’t travel without having insurance, you cannot build a house without having insurance, you can’t buy a car without, Nothing cam be done without insurance,” Agbaje said.
The Managing Director/ CEO, Universal Insurance Plc Dr. Jeff Duru, called on Nigerian government to work seriously to ensure that borrowed funds are used judiciously to the benefits of the economy.
Duru described insurance industry as worst hit when borrowed funds meant to stabilize the economy, mobilize the industry, channel into the economy are not being used.
”The insurance industry faces it badly because we don’t have assets, no construction, no access, no development for us to insure, make money and impact the economy.” he said.
The Managing Director/Chief Executive Officer, Cornerstone Insurance , Stephen Alangbo in his own address noted that “debt is part of business used to build infrastructure, and these infrastructures flow into insurance because most of the risks are covered, and it’s better for the industry. But when you compare it to situation when you don’t have the debt, infrastructure within the country is not developed, insurance will not be able to benefit.
Alangbo advised that some of those debt should be used properly to build those infrastructure,Assets, adding that when done properly it will eventually lead to economic development and job opportunities in the country.
On the part of his company he said, Cornerstone Insurance would partner with government and most of these establishments to ensure value creation as a result of product innovation to meet some of these emerging needs in the market as a result of risk that comes with some of the development that is going to happen in the country. We provide insurance solution to be able to meet their needs.
”We are also going to support them ensuring that areas where we have micro insurance for the workers who are involved in some of this construction infrastructure, we build products, micro product that meets their needs and that help also to be able to secure tomorrow, the future of the emerging workforce, “ he said.
While, H.E. Mamo E. Mihretu Governor, National Bank of Ethiopia, noted that “public debt influences interest rates, inflation, foreign exchange conditions, and the overall macroeconomic stability — all of which have profound implications for the insurance sector.
He added that for the insurance industry sovereign debt levels are not just numbers on a balance sheet; they shape investment strategies, asset-liability matching, solvency margins, and consumer confidence. Addressing debt challenges is, therefore, integral to building a vibrant and resilient insurance industry.
For instance, if you borrow to construct roads, of course in future you use your return on investment on your taxation, on your custom duties. The country is making money from all that. You can pay off those debts.
