Insurance’s critical role in Nigeria’s battle against economic instability

Cynthia Ezekwe

Nigeria’s economy remains embroiled in a perilous state, plagued by shrinking living standards, widespread financial distress, and an unrelenting inflationary spiral.

In the face of these challenges, insurance has been widely regarded as a critical line of defence against potential financial losses, providing a vital source of security and stability amidst the  country’s unpredictable economic landscape.

In an economic environment beset by uncertainty and volatility, the significance of insurance as a catalyst for economic development has become all the more pronounced. According to analysts, insurers stand as the bedrock of economic resilience, deftly mitigating the risks associated with potential economic threats and facilitating the growth and success of people and businesses even amidst adverse circumstances.

For developing economies like Nigeria, insurance serves as a potent tool for promoting economic growth, development, and reliable risk coverage for its citizens. By minimising risks, insurance provides a stable and secure environment for businesses, big and small, to operate, reducing the risk of market volatility and failure.This stability, in turn, fosters economic advancement, leading to greater prosperity.

Insurance, while often perceived solely as a safety net,also plays a catalytic role in driving growth and innovation, by instilling confidence and enabling business leaders to take calculated risks, knowing that their operations are protected against adverse events.

For consumers, insurance acts as a financial fortress, safeguarding individuals against unforeseen costs and expenses. By providing coverage for unexpected healthcare bills, property damage, and more, insurance enables consumers to maintain their purchasing power even in volatile times. By shielding against these unexpected financial blows, insurance empowers consumers to play a vital role in driving economic resilience and growth. Insurance provides the financial security and stability that allows consumers to continue engaging in the economy, contributing to its robustness and health.

Despite the immense potential of the insurance sector to contribute significantly to the Nigerian economy, the industry remains severely underutilized, according to recent findings from Agusto and Co.

The survey revealed that in 2022, insurance penetration in Nigeria stood at one percent of the population, a dismal figure given the country’s vast population of over 200 million people. This low penetration not only hinders the ability of individuals and businesses to manage and mitigate risks but also limits the sector’s capacity to drive economic growth.

Calling on the need for an intensified insurance penetration in the most populous black nation, Oluwatosin Olaseinde, CEO of the financial literacy platform Money Africa, highlighted the crucial importance of insurance in times of economic turmoil, emphasising that insurance is not a mere luxury, but rather a vital necessity during periods of uncertainty.

Olaseinde stressed that the current economic downturn has had far-reaching consequences for individuals and businesses, with unemployment, business failures, and reduced incomes becoming the new normal.

“The recent economic turbulence has given rise to widespread financial insecurity, heightening the importance of insurance as a means of protecting against unforeseen events and preserving economic well-being,” she explained, emphasising that insurance serves as a vital shield against the devastating effects of the economic crisis.

Drawing attention to the diverse array of insurance products, Olaseinde highlighted the benefits of life insurance, health insurance, and business insurance, each serving a distinct yet crucial purpose in mitigating financial risks.

Addressing the crucial need for businesses to protect themselves against potential risks, Olaseinde highlighted the importance of liability, property, and business interruption insurance, which provide critical protection against claims, damages, and unforeseen interruptions.

She underscored the importance of these insurance products, stating, “In today’s volatile economic climate, businesses need to safeguard themselves against potential risks to ensure their long-term viability.

 Olaseinde also emphasised the critical role of insurance education in fostering financial inclusion, reducing poverty, and creating more employment opportunities, all of which will ultimately contribute to the economic development of the country.

The Money Africa CEO further expounded on the crucial role of insurance education, stating that it has far-reaching implications for various aspects of society, including healthcare and employment.

“When people are educated about insurance, it has a ripple effect that extends beyond just financial protection. It improves healthcare, creates jobs, and brings about numerous other benefits,” she said.

Olaseinde pointed out that the importance of insurance cannot be overstated as Nigeria seeks to achieve sustainable economic growth and development, adding that by recognising the critical role of insurance, Nigeria can unlock its economic potential, promote financial inclusion, and secure a brighter future for all.