Nigeria’s underdeveloped insurance sector poses significant risks not only to economic growth but also to the stability of the country’s banking system, according to business analyst Chika Mbonu.
Speaking during an interview on Arise News, Mbonu argued that insurance serves as a critical pillar of the financial system, providing protection for many of the assets and collateral underpinning bank lending and investment activities.
“A strong insurance industry is fundamental to a healthy banking sector because many of the securities held by financial institutions depend on effective insurance coverage,” he said.
Low Penetration Undermines Economic Resilience
Mbonu noted that insurance penetration in Nigeria remains below one per cent of gross domestic product, reflecting persistent structural challenges that have limited the industry’s growth.
He attributed the low uptake of insurance products to weak public confidence, limited consumer awareness, inadequate product innovation, distribution constraints and widespread concerns over claims settlement.
According to him, many prospective policyholders remain reluctant to purchase insurance because of a perception that some insurers collect premiums without honouring legitimate claims.
Stronger Insurers Could Support Credit Growth
Mbonu said a more financially robust insurance industry would strengthen the broader financial system by protecting assets pledged as collateral for bank loans, improving confidence among lenders and supporting financing across key sectors of the economy.
He identified mortgages, aviation, oil and gas, and other capital-intensive industries as areas that would particularly benefit from stronger insurance capacity.
The analyst also endorsed the National Insurance Commission’s (NAICOM) recapitalisation programme, describing stronger capital requirements as an important step toward creating insurers with greater financial resilience and improved claims-paying capacity.
According to him, better-capitalised insurers are more likely to meet their obligations to policyholders, helping to restore public confidence in the industry and discourage practices that have damaged its reputation.
Call for Tougher Enforcement
Beyond recapitalisation, Mbonu urged regulators to intensify enforcement of compulsory insurance policies, warning that the continued circulation of fake insurance certificates undermines market integrity and weakens consumer trust.
He said effective regulatory oversight would be essential to ensuring that reforms translate into improved compliance, greater insurance penetration and a healthier financial ecosystem.
Transparency Important, But Economic Outcomes Matter
Commenting on the Central Bank of Nigeria’s 2025 financial statements, Mbonu said the publication of the accounts represented a positive step toward greater institutional transparency.
However, he argued that the central bank’s performance should ultimately be measured by broader economic outcomes rather than accounting profits alone.
According to Mbonu, maintaining price stability, preserving confidence in the financial system, managing foreign reserves and supporting sustainable economic growth remain the most important indicators of the apex bank’s effectiveness.
He added that improvements in inflation, exchange-rate stability, employment, borrowing costs and public confidence in the banking system would ultimately determine how Nigerians assess the success of monetary policy.
