Global rating agency, Fitch, has identified the “low average earnings and widespread poverty” in Nigeria as some factors weighing on insurance affordability and the growth of the sector.
The agency stated this in its latest Nigeria Banking and Financial Services Report for the third quarter of 2020, on Thursday.
According to the agency, these factors have continued to limit the outlook for premium and even the more affluent middle-class consumers tend to avoid purchasing insurance, which also hampers the growth of compulsory basic insurance lines such as motor vehicle insurance.
“Nigeria’s potential consumer base needs to be educated more about the benefits of both life and non-life insurance coverage to support more robust growth in the sector,” the agency added.
The agency, however, predicted that with a market supported by the country’s steady economy and large population, Nigeria’s insurance sector will enjoy a period of growth and development over the medium and long term, albeit interrupted by a slower pace of growth in 2020 due to the effects of the COVID-19 pandemic.
“We forecast premiums in the smaller, life insurance market to increase by a downwardly revised 4.8 per cent in 2020 to reach a level of N179.81 billion amid a weaker economic backdrop and higher inflation.
“We see strong growth in life premiums over the medium term to reach N217.96 billion by 2024. We forecast premiums in the larger non-life insurance market to increase by a revised 2.9 per cent rate in 2020 to reach a level of N248.85 billion.
“We expect this trend in growth trajectory to continue over the medium term with non-life premiums reaching N321.53 billion by 2024,” it stated.