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Since embarking on a compre-hensive program of reform sev-eral years ago, Nigeria has be-come one of the fastest growing

economies in Africa. Real gross domes-tic product has increased by an averageof 7.3 percent over the last four years,while growth this year is projected toreach 9 percent.

Impressive though this is, Africa’smost populous nation has some way togo before it can be sure of fulfilling itspotential to become one of the world’stop 20 economies by the year 2020.

Nigeria is one of the biggest oil andgas producer on the continent, and itseconomy—the second largest in sub-Sa-haran Africa—remains heavily dependenton oil, which accounts for more than 95percent of its export revenues and abouta third of the country’s GDP.

Yet, as President Umaru Yar’Aduapointed out, in spite of Nigeria’s hugerevenue earnings from oil, the contri-butions of the energy sector to the coun-try’s GDP have been relatively unim-pressive.

“The enormous potentials of our oiland gas industry for generating eco-nomic growth, the provision of mass em-ployment and for providing a strong foun-dation for the transformation of our in-dustrial and agricultural sectors has nev-er really been prioritized,” he said re-cently.

In the meantime, what he describedas the country’s abysmal electric powersituation has stunted Nigeria’s econom-ic growth, crippled industry, and gener-ally made life difficult for its teeming pop-ulation of 140 million.

A comprehensive restructuring of theoil and gas sectors is under way, involv-ing the reorganization of all the policy,regulatory, operational, and commer-cial organs of the industry.

At the same time, attempts are beingmade to develop and diversify the econ-omy. President Yar’Adua’s Seven-pointAgenda focuses on improvements in pow-er and energy infrastructure, food secu-rity and agriculture, wealth creation andemployment, mass transportation, landreform, security (particularly in the oil-rich Niger Delta), and education.

Foreign direct investment has beenflowing in, and this is crucial to imple-mentation of the federal government’s Vi-sion 2020 policy. Between now and 2020,Nigeria hopes to attract $600 billion inFDI, and has been working to provide anenabling environment for the private sec-tor and an improved investment climate.

Shamsudeen Usman, the Minister ofFinance, says, “Our country is now abeautiful bride for foreign investors.”

Nigeria has returned to democracysince turning its back on decades of cor-rupt military rule—and economic stag-nation—in 1999. In May last year, it bol-stered its claim to political as well as eco-nomic stability with its first handover

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from one civilian administration to an-other since independence when Mr.Yar’Adua took over the presidency fromOlusegun Obasanjo.

According to Dr. Usman, Nigeria’seconomic performance continues to befavorable. “There is a bright prospectgoing forward,” he says. At the end ofJuly, external reserves totaled in excessof $60 billion, an increase of almost $9billion from December 2007.

Since the previous Obasanjo admin-istration negotiated milestone debt for-

giveness agreements with internationallenders in 2005 and 2006, Nigeria hassucceeded in eliminating almost all ofits external debt. Public debt is low ata ratio to GDP of 11.4 percent.

The government has been working withthe International Monetary Fund on de-veloping a new economic policy package.The priorities will continue to be main-taining macroeconomic stability, deepen-ing structural reforms, and enhancing theparticipation of the private sector in eco-nomic management, particularly in de-

velopment of the country’s infrastructure.Speaking at a session on the govern-

ment’s 2009-2011 Medium Term SectorStrategy in Abuja recently, Dr. Usman said,“Our emphasis will increasingly be on en-suring greater result-orientation, im-proving the effectiveness and efficiency ofthe government’s development initiatives,and enhancing incentives for heightenedstewardship and accountability in publicexpenditure management.”

Government spending this year is fo-cused on completing ongoing projects,but money is also being set aside to ad-dress key infrastructure projects.

Major improvements in infrastructureare essential to help Nigeria achieve sus-tainable economic growth and socialdevelopment. There is a strong empha-sis on public private partnerships (PPPs)as the government cannot meet the costof the projects alone. There are tremen-dous opportunities for PPPs in varioussectors, particularly in transportation,aviation and energy.

Nigeria’s banking industry still has hugepotential for significant growth, says Chuk-wuma Soludo, Governor of the CentralBank of Nigeria (CBN) and the architectof reforms that have transformed the coun-try’s financial system in recent years.

According to Professor Soludo, Niger-ian banks—among the fastest growing inthe world—have become a vital drivingforce behind the emergence of the coun-try’s new economy.

The transformation is a direct result ofrecapitalization forced on the banks fiveyears ago. The CBN’s insistence on a muchhigher minimum capital base promptedmergers and acquisitions and led to theslimmed down but far stronger, more dy-namic, and fiercely competitive institutionsof today.

The restructuringof the industry hasenabled the banks tocompete both local-ly and internation-ally, and has openedup credit lines frommultilateral creditagencies and foreignbanks.

Banks that havegone to the capitalmarkets for addi-tional funds are nowwell above thebenchmark set by theCBN. Last yearalone, they raised more than $10 billionto scale up their operations. Strong eco-nomic growth, boosted by the rise in crudeoil prices, is fuelling demand from corpo-rate clients and from Nigeria’s growingmiddle class.

And the banks are reaping the rewards.Intercontinental Bank’s most recent an-nual returns show its total assets plus con-tingents at N1.7 trillion ($14.4 billion), upby 108 percent, making it the biggest bankby assets, and the first bank to pass the N1trillion mark in deposits. Profit after taxfor 2007 rose by 125 percent to N34.8 bil-lion ($295.6 million).

Zenith Bank, the second largest by as-sets, recently reported a 119 percent in-crease in its year profit after tax to morethan N41 billion ($348.5 million).

Crucially, the banks are now well posi-tioned to tap into global financial marketsand to support big-ticket projects in the in-frastructural development that is vital toNigeria’s future economic progress.

Meanwhile, the banks are spreading theiractivities across West Africa, and the talknow is of Lagos becoming the financial hubnot just of the region, but also of the con-tinent by 2020. Professor Soludo says thisis a realistic ambition.

The statistics tell a story of ongoing ex-pansion and increasing involvement in eco-nomic growth. Between 2003 and 2007bank credit to the private sector as a per-centage of GDP rose from 18.4 percent to31.4 percent. Last year credit to the pri-vate sector grew by almost 100 percent.

“In Nigeria’s history, credit to the pri-vate sector has never grown by up to 50 per-cent in any one year, but it grew by 97 per-cent in 2007,” says the Central Bank chief.

He points out that there is a strong cor-relation between economic output and cred-it. “No wonder that in spite of the nega-

Continued on page 2

Lagos, the economic hub of Nigeria, is sub-Saharan Africa’s second largest economy after South Africa.

Sub-Saharan giantNigeria has thepotential to becomeone of the world’s top20 economies by theyear 2020, but first itneeds help to developits infrastructure

INSURANCE

Business expansion reflectsgrowing confidence ininsurance sector’s potential.Page 5

CAPITAL MARKET

The government takes action tocheck a decline in the marketafter two years of phenomenalgrowth. Page 3

LAGOS

Major plans to improveinfrastructure of fast-growing city nowunderway. Page 7

PROJECT TEAM:Alex de la Mare andFrances Nicholls

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Nigeria

CHUKWUMA C.SOLUDOGovernor, Central Bank of Nigeria

“Our emphasis will increasingly be on ensuringgreater result-orientation, improving the effectivenessand efficiency of the government’s development initia-tives and enhancing incentives for heightened stew-ardship and accountability in public expenditure man-agement.”

SHAMSUDEEN USMAN Minister of Finance

NIGERIA-WSJ 1-4 DRAFT .qxd 17.09.2008 13:48 Página 1

As the Managing Director andChief Executive Officer of SkyeBank, Akinsola Akinfemiwa is inno doubt that the circumstancesof its creation—through the merg-er of five existing institutions in2006—has given it an edge in anincreasingly competitive market.

“The advantages are that wecomprise a team of experts withextensive previous in-house ex-perience who can share intelli-gent ideas and work together eas-ily,” says Mr. Akinfemiwa. “Ourpeople have experience in the cap-ital and retail market, as well asthe public sector, so we come froma whole spectrum of back-grounds.”

Owned by institutional and in-dividual investors and listed on theNigerian Stock Exchange, SkyeBank has seen its assets growfrom N80 billion ($67million) to more thanN560 billion ($4.75billion). Unaudited re-sults for the bank’sthird quarter, endedJune 30, showed anincrease in profit aftertax to N10.8 billion(almost $92 million),compared to N3.2 bil-lion for the same pe-riod in 2007. Turnover,rose by 64.46 percentto N47.2 billion fromN28.7 billion.

“We have clearlytaken advantage of ourhuge growth potential,” says Mr.Akinfemiwa.

Skye Bank is a full servicebank, whose customers rangefrom individuals, corporate bod-ies, and multinationals to gov-ernment and multilateral insti-tutions and agencies. The bankboasts a diversified product baseand a nationwide network of morethan 240 branches, covering thesix geo-political zones of the coun-try.

Since consolidation, the net-

work has been aggressively ex-panded to advance the bank’s re-tail strategy, with a particularfocus on unbanked and under-banked locations. Further ex-pansion is currently underway,with plans for 21 new outlets inLagos.

This is supported by the pro-ceeds from a N50 billion sub-scription offer launched at thebeginning of the year, aimed atstrengthening the growth of thebank and its subsidiaries. Thebank’s information technology in-frastructure is also being en-hanced.

“Given the fact that we dealwith a high volume of people thatwant to check their balances eas-ily using tools such as their mo-bile phones, our IT platform al-lows for easy internet and tele-

phone banking,” saysthe MD. “Nowadays,many people are de-pendent upon elec-tronic banking to maketheir lives easier.”

Well-trained staffare also seen as crucialto customer appeal andthe bank boasts twotraining schools, onein Lagos and one in thesouthwest of the coun-try.

Mr. Akinfemiwa is astrong advocate of theneed for professionaltraining in the industry,

and Skye Bank’s commitment tothe development of human capi-tal was recently underlined withthe inauguration of a chapter ofthe Chartered Institute of Bankersof Nigeria (CIBN) at the bank.

The MD believes this commit-ment is one of the factors that setsthe bank apart. “We pay partic-ular attention to improving the ca-pabilities of our employees in or-der that they perform better intheir jobs,” he says.

The success of this customer-

Focusing on thecustomer is the key to successThe product of a merger between five bankinginstitutions two years ago, Skye Bank hasgone on to emerge as a one-stop financialservices provider and an importantcontributor to economic development

SKYE BANK

centric philosophy is reflected ina number of awards garnered bythe bank, including the Instituteof Direct Marketing’s Most Cus-tomer-Friendly Bank award.

Skye Bank’s emergence as aone-stop financial servicesprovider is a direct result of themerger between the five originalinstitutions. “It has proved to bea major success for us and for thiscountry. Skye Bank can providefor all needs in the vast array offinancial services, from educa-tion to corporate banking, in-vestment in capital markets, andreal estate financing.”

The bank has expanded its port-folio, providing financial adviso-ry services through four sub-sidiaries: Law Union & Rock, ofwhich it owns 51 percent; andwholly owned subsidiaries SkyeFinancial Services, Skye Trustees,Skye Mortgages, and APEX In-tegrated Technical.

As a major player in invest-ment and capital market opera-tions, Skye Bank plays a signifi-cant role in the development ofthe economy. Its corporate bank-ing department has been involved

in major strategic and big-tickettransactions, and has secured ma-jor lines with multilateral andother foreign lending institutions.

Sectors for which it has pro-vided project finance includetelecommunications, oil and gas,power, manufacturing, transport,

aviation, maritime and infra-structure, as well as public sec-tor funds management.

“In a nutshell, we understandthe investor and his needs and, dueto our ownership structure, wehave many international con-tacts,” says Mr. Akinfemiwa. “Weknow where to position ourselvesand where business is going tocome from, and we also knowhow to work with the govern-ment.”

In the real estate sector, Skye

Bank has supported major hous-ing projects in Lagos, Abuja, andPort Harcourt. Last year in amove to take advantage of theopportunities in the sector, itlaunched a close-ended real es-tate investment trust (REIT)scheme. The subscription offer of20 million N100 units was thefirst of its kind by any Nigerianbank since the Securities and Ex-change Commission and theNigerian Stock Exchange begansensitization for the listing ofREITs in the market.

While there are no immediateplans for expansion beyond na-tional boundaries, Mr. Akin-femiwa says, “We are sure toseize the business opportunitiesif and when they should arise,and we will eventually havebranches in the United States andthe UK.

“First and foremost, we want tobe a major Nigerian bank and a ma-jor retail outlet in the country,” headds. “If we are able to do that thenwe will be very satisfied. The chal-lenge to enter the internationalmarket is there, but it does not haveimmediate precedence.”

AKINSOLAAKINFEMIWAManaging Director& Chief ExecutiveOfficer of Skye Bank

tive growth rate of the oil sector, GDP still grewby over 6 percent.”

Over the same four-year period the banks’ sharein the most capitalized companies on the Niger-ian Stock Exchange rose substantially from 30 per-cent to 65 percent. The asset base of the bankingsector itself grew by approximately 277 percent.

By the end of February this year, 11 banks hadin excess of $1 billion in tier 1 capital, the coremeasure of a bank’s financial strength; the min-imum level to which the banks were required torecapitalize by the CBN was N25 billion (around$215 million).

Of the 24 (out of 89) banks that have survivedthe consolidation process, 20 now feature amongthe world’s top 1,000 banks, while 19 are in thetop 30 banks in Africa.

Money is being spent on extending and up-grading infrastructure. The number of branchesmushroomed from 3,247 in 2003 to 4,579 in2007, while state-of-the-art technology is takingbanking in Nigeria to a new level.

A multitude of new products and services is be-ing offered to the public as the banks fight fortheir share of the retail market. At present onlyaround 10 percent of Nigeria’s population of 140million has a bank account.

The CBN is tightening up on supervision andbanking standards are gradually rising as thebanks adopt global industry practices.

In August, Professor Soludo announced thatall banks must regularly publish their lendingrates for each sector of the economy and re-spective charges. He said the policy would havea positive effect on the interest rate regime. Trans-parency and full disclosure would “engender ahealthy competition as well as create a conver-gence among the banks.”

From January 2009 the CBN will post staff toeach of the banks to monitor and supervise theiractivities on a daily basis, with the aim of strength-ening its supervisory effectiveness. “It is designedto enhance our hands-on knowledge of the banks’operations, the complexity of their risk profile,and to provide real-time and continuous evalua-tion of their operations,” says Professor Soludo.

However, the CBN has postponed the compul-sory adoption of a uniform financial year-end inthe industry from its original target date of De-cember 2008 to December 2009. This is in re-sponse to what is described as the observeddesperate behavior of some banks in deposit mo-bilization and hiking interest rates to levels thatcannot be justified by the fundamentals. The CBNsays it will investigate these practices.

Professor Soludo’s response to the question ofwhether the banks are making too much profit isan emphatic “No!” He says return on equity isstill relatively small and there is still huge poten-tial for significant growth. He highlights a num-ber of challenges on the road ahead, however,acknowledging, “We still have a long way to go.”

The governor points out that the savings rate isstill low, a mortgage system is largely absent, andthat total credit to small- and medium-sized en-terprises is around 4.2 percent of the total. Totalcredit as a percentage of non-oil GDP is just around31 percent.

Bigger and stronger banks stillhave huge potential for growth

Further expansion of Skye Bank’s branch network is under way, with plans for 21 new outlets in the capital.

Risk assessment has taken on a whole new dimensionwith the huge amount of capital that has come into thesector. With pressure from shareholders who want tosee immediate results, the challenge is how best to in-vest the fresh funds and ensure greater returns withouttaking unnecessary risk. Professor Soludo identifies aneed for improved corporate governance and risk man-agement in an era when the regulator has becomestricter.

As competition in the sector hots up, and with a slewof capital-raising public offers having already passedthrough the capital market, some analysts forecast afurther round of market-driven consolidation as thelarger banks seek to achieve greater scale by furthermergers and acquisitions.

Continued from page 1

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Nigeria

The bank has emergedas a one-stop financialservices provider parexcellence

FACTS &FIGURES

�Location:Western Africa, borderingthe Gulf of Guinea, betweenBenin and Cameroon

�Area - comparative:Slightly more than twicethe size of California

�Coastline:853 km

�Population:138,283,240 (July 2008 est.)

�Languages:English (official), Hausa, Yoruba, Igbo (Ibo),Fulani

�Capital:Abuja

�GDP (purchasing power parity):$292.7 billion (2007 est.)

�GDP - real growth rate:6.4% (2007 est.)

�GDP - composition bysector:Agriculture: 17.6%Industry: 52.7%Services: 29.7% (2007 est.)

�Population below poverty line:70% (2007 est.)

�Exports:$62.42 billion f.o.b. (2007est.)

�Exports - commodities:Petroleum and petroleum products 95%, cocoa,rubber

�Exports - partners:US 51.2%, Brazil 7.9%,Spain 7.6% (2006)

Source: CIA WorldFactbook

NIGERIA-WSJ 1-4 DRAFT .qxd 16.09.2008 18:59 Página 2

Substantial investments in its IT infra-structure have placed Afribank at theforefront of e-banking in Nigeria—to thepoint that other banks have paid it thecompliment of using it as a model.

“Actually, we were the first to intro-duce a platform for delivering e-ser-vices, so you could say that we were pi-oneers,” says Sebastian Adigwe, thebank’s Managing Director and ChiefExecutive.

Since then, the bank has continuous-ly assessed and sought to improve its da-ta system, in terms of speed and pro-ductivity, in order to provide the best ser-vices for its customers.

“Thanks to this approach,there is no doubt that Afrib-ank has one of the best ITplatforms in the country.Even the Central Bank is ad-vising other banks to applyour model of IT structure,”says the MD.

Following a successfulpublic share offer at the endof last year that boosted thebank’s capital base to N140billion (over $1 billion), some9.5 billion naira has been al-located to a system upgrade.

The bank boasts more e-banking products and services than anyother banking institution in the country,and was the first Nigerian bank to cre-ate a one-stop e-service solution center.It was one of the few banks appointedas partners in the newly introduced e-payments for Nigerian Immigration Ser-vices and has recently embarked on anambitious IT project called eNYSC, inpartnership with National eGovernmentStrategies (NeST) and the NationalYouth Service Corps (NYSC).

Afribank currently operates 300branches and cash offices across thecountry. Expansion of the network is animportant part of the current five-year

plan. Over the last two years the networkhas grown from 179 branches to 300.By the end of the year, it is expected toexpand to 375 branches equipped for on-line, real-time e-banking, e-immigra-tion and local and international moneytransfer services.

Old branches are being renovated, re-vamped and rebranded. “This year wehave already put 25 percent of our out-lets through this process, and by the endof next year we expect to have com-pleted the process with the remaining 75percent,” says Mr. Adigwe.

During the restructuring of the bank-ing sector, Afribank consol-idated with its subsidiary,Afribank Merchant Bank.When the Central Bank be-gan the liquidation of thosebanks that had not met thenew minimum capital base re-quirement, Afribank grewfurther by acquiring LeadBank and Assurance Bank.

Today, with total assetsnow worth over N500 bil-lion ($4.2 billion), and overN145 billion in sharehold-ers funds, Afribank is one ofNigeria's top ten banks byassets.Pretax profits are pro-

jected at N20 billion ($170 million) by2010.

Afribank has expanded its portfolio,providing financial advisory servicesthrough seven subsidiaries, AfribankCapital Markets, Afribank InsuranceBrokers, ANP International Finance inDublin, Afribank Estate Company, Afrib-ank Trustees and Investments Limited,AIL Securities, and Afribank Registrars.

With its Afribank Capital Marketssubsidiary, the bank is well positionedto support infrastructure developmentprojects such as road and rail schemes,construction, housing, power, and oiland gas projects.

“Overall, we are well positioned interms of corporate finance as well asthe capital market to support the de-velopment of Nigeria’s infrastructureand the real estate sector,” says Mr.Adigwe.

It is currently the largest financier ofthe downstream sector, including trans-portation and shipping infrastructure.“For shipping infrastructures, we areworking with the Nigerian Maritimeand Safety Agency (NIMASA) as themain collector of their tax. That has puta lot of funds in our system. We are al-so at the forefront of NIMASA’s pro-ject for the launching of a shipbuildingand ship maintenance fund.”

The bank is also active in the up-

stream sector of the oil and gas indus-try. Together with international financiersand partners, it is currently involved infour oil blocks, all of them active. “Oneof the factors that allowed us to raisecapital of over $1billion was to be ableto capitalize on the oil and gas indus-try opportunities to make the most ofthe local content policies that are nowin place,” Mr. Adigwe explains.

Afribank is currently working withconsultants on its plans for expan-sion into Ghana. Market possibili-ties in India and China are also be-ing assessed. “We are also con-verting the license of our subsidiaryin Dublin – ANP International Fi-nance – to a full banking license,”says the MD.

Spending on IT is a crucial elementin expansion strategy for Afribank

Government takes action tostabilize market in bearish times

One of Nigeria’s top 10 banks by assets, Afribank has used substantialinvestment in information technology to secure its place in the market

BANKING

STOCK EXCHANGE

Currently expanding its network, Afribank is projecting pre-tax profits at N20 billion by 2010.

SEBASTIANADIGWEManaging Director& Chief ExecutiveOfficer of Afribank

After last year’s enthusiasm for Nigerian equities, the capital market has been undergoing a period of correction that reflects the global trend

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Nigeria

After a long bull run over the lastcouple of years during which itturned in a phenomenal perfor-mance, the Nigerian Stock Ex-change (NSE), like its counter-parts elsewhere, has been under-going an altogether rougher ridein 2008.

The government’s reaction tothe significant downturn that be-gan in April has been to introducea series of measures intended tostabilize the market.

In August, a 16-strong presi-dential advisory team was set upto restructure the market and in-crease its attractiveness to investorsat home and abroad. Members in-clude ministers, the Chief Eco-nomic Adviser to the President,the Governor of the Central Bankof Nigeria, and the managing di-rectors of several leading banks.

A capital market stabilizationfund is to be established, to be used“to intervene promptly, effective-ly and prudently in the Nigerianstock market as the need arises.”

The advisory team’s first initia-tive was to change the rules to al-low listed companies quoted onthe exchange to buy back up to 20percent of their own shares to checkthe run of bearish trading.

Finance Minister ShamsudeenUsman also announced a one per-cent limit on downward daily pricemovements, while the current fivepercent limit on upward movementis to be retained.

The NSE and the Securities Ex-change Commission (SEC), thecapital market regulator, wouldtake steps to stem the rate of newlisting until the market steadied,the minister added. The NSE wouldreview its trading rules and regu-lations, and there would be “strictenforcement” of listing require-ments, with zero tolerance for in-fractions.

Together with all capital mar-kets operators, the NSE and SEChave agreed to reduce their fees sig-nificantly—in the case of the NSE,by 50 percent.

Appropriate measures are to betaken by the Central Bank of Nige-ria to improve liquidity in the sys-tem if it is judged necessary. Thebanks have been asked to re-structure existing credit facilitiesto licensed stockbrokers, institu-tional, and individual investors toallow for longer repayment peri-ods.

The minister said banks wouldpartner with market makers to in-ject funds into the capital marketthrough appropriately structuredcredit facilities.

The downward trend of the mar-ket is in marked contrast to its re-markable rise in recent years, dur-ing which it has been buoyed bythe reforms in the financial sector,including consolidation of the bank-

ing and insurance sectors and pen-sion reform. Investors have reapedsignificant gains.

By the end of 2007, the NSEAll-Share Index had recorded a74.7 percent increase. Totalturnover volume rose to 138.1 bil-lion shares, from 36.7 billion sharesin 2006—an increase of 276.3percent. Total turnover valuereached N2.1 trillion ($17.9 bil-lion), or 19.5 percent of gross do-mestic product, representing anincrease of 343.65 percent fromN470.2 billion in 2006.

According to Musa Al-Faki, theDirector-General of the SEC, thestock market has attracted newinvestments worth N2.3 trillion inthe last five years as the markethas won the confidence of foreigninvestors.

Banks now account for 17 ofthe 30 biggest companies listedon the NSE, and seven of the top10. A flood of capital raising shareoffers from the banks has excitedinvestor interest, with many of

them ending up hugely oversub-scribed. Leading performers onthe exchange include First Bank,Intercontinental Bank, ZenithBank, United Bank for Africa(UBA), and Oceanic Bank.

Following the more recent con-solidation of the insurance sector,insurance companies like Conti-nental Reinsurance, Custodian andAllied Insurance, Staco Insurance,and Intercontinental Energy In-surance have also had a notableimpact on the market.

Opinions vary on the reason forthe recent plunge. Some blame in-vestors selling shares to buy intoa slew of private placements, or thetight monetary policies of the cen-tral bank. Some attribute the slideto new rules and regulatory deci-sions made by the SEC and theNSE.

Others say a correction in themarket was inevitable, that it re-flects the current global trend, andthat markets do—after all—some-times go down as well as up.

“Even the Central Bankis advising other banks to apply our model of ITstructure”

NIGERIA-WSJ 1-4 DRAFT .qxd 17.09.2008 13:47 Página 3

As the economy has continued toexpand, and wealth and the cap-ital market have grown with it,so has the number of potentialclients for the country’s assetmanagement industry.

Investors with a mid- to long-term perspective on the markethave been taking advantage re-cently of an N5 billion ($42 mil-lion) equity fund offering by Afrin-vest West Africa.

In the current more turbulenttimes for the stock market, manywill have been encouraged by thefact that Afrinvest is the first as-set manager in Nigeria to havebeen awarded an A+ interna-tional rating. Global Credit Rat-ing was impressed by the com-pany’s research capability, itsthorough understanding of theWest African region, marketsand regulatory environment, andits experienced and skilled in-vestment team.

Godwin Obaseki, Afrinvest’sManaging Director and Chief Ex-

ecutive Officer, remains confi-dent that the Afrinvest EquityFund, the first mutual fund inwhich it has invited the public toparticipate, will achieve the fore-cast return on investment of 35percent, 30 percent and 27 per-cent over the next three years.

The fund will be invested inhigh quality equity securities quot-ed on the stock exchange, in ad-dition to other securities approvedby the Securities and ExchangeCommission and the trustees.

Nigeria’s asset managementindustry is still developing andcurrently lacks breadth, as thereare limited asset classes in whichto invest funds.

As a securities firm involved inasset management, investmentbanking, securities trading, and

Afrinvest pridesitself on its humancapital, knowledge,and research skills

ASSET MANAGEMENT

FBN CAPITAL

Economic reform and the deepening and increasingsophistication of the Nigerian capital market havecreated a demand for a new and varied range of fi-nancial products among the investing public.

The FBN Heritage Fund, an open-ended mutual fundwith an initial tranche of 50 million units offered atN100 per unit launched last November, is the firstof a series planned by FBN Capital, theinvestment-banking arm of First Bank.

“We are also developing a series of mu-tual funds aimed at sectors we considerwould offer high growth potential such asreal estate, oil and gas, technology, andinfrastructure,” says Bayo Adeleke, Man-aging Director and Chief Executive Offi-cer.

The FBN Heritage Fund is balanced inits asset allocation structure, and will in-vest proceeds between the ranges of 50-65 percent in stocks, 15-25 percent infixed income bonds, 5-10 percent in mon-ey market instruments, and a maximumof 5 percent in real estate.

Mr. Adeleke is unfazed by the currentadjustment in the equities market. He says the com-pany anticipated a general correction and is confi-dent the fund—primarily aimed at investors who havea long-term investment perspective—will deliver onits projections over the next three years.

FBN Capital is the product of a merger betweenthe investment banking businesses of former FBN (Mer-chant Bankers), MBC International Bank, and theCorporate Finance Group.

The company provides a full range of investmentbanking services, including merger, acquisition, strate-gic advisory, brokerage, asset management, capitalraising, and financing services. “Others describe usas leaders of the corporate and investment bankingsub sector in this country,” says the MD. “This placesa lot of responsibility on us.”

The firm is one the leading issuing houses in Nige-ria, numbering among its clients some of the largestNigerian and multi-national corporations, the feder-al and state governments, and institutions from acrossWest Africa, and has been involved in some of the

largest equity issues in Nigeria’s history, includingthe recently completed First Bank of Nigeria N100billion offer.

It has been instrumental in some of the biggest Niger-ian debt and equity issues like the $479 million debtarrangement for the construction of the Obajana ce-ment plant.

FBN Capital also has one of the largestunderwriting capacities in the Nigeriancapital markets, leveraging on its rela-tionship with its parent company.

One of the sectors in which it has beeninvolved is the oil and gas sector. Mr.Adeleke says a number of internationalparticipants in the sector have expresseddoubts over the potential demand for gasfor the domestic market. He disagrees.“In view of the significant deficit in pow-er generation, it is my view that domesticdemand for gas alone is enough justifica-tion for investment.”

The company has already worked on thefinancing of a gas distribution project inLagos with a company called Gaslink, part

of the Oando Group. “We are currently involved inthe financing for a similar project being carried outin Calabar. In our experience, financing is not the ob-stacle for developing gas, it is the rules of engage-ment that must be put in place for all participants.”

Mr. Adeleke says FBN Capital has had a goodresponse from dealingwith foreign partici-pants in the oil and gasindustry. “We have beenvery successful in fi-nancing the acquisitionof oil rigs and have par-ticipated in large trans-actions with values inexcess of $600 million.Some of this has beenfor local companies toenable participation inthe local content policyin the oil industry.”

Since 1985, Continental Reinsurance has been at the forefront of the Nigerian insurance industry.A world-class player, we are expanding across Africa and beyond into the Middle East,

bringing our excellence and reliability with us everywhere we go.

CONTINENTAL REINSURANCE PLCHeadquarters: St. Nicholas House, 6 Catholic Mission Street, PO Box 2401, Lagos, Nigeria, Tel: +234 (0) 1 266 5350

www.continental-re.comCameroon Office: Rue Ngosso DIN, Derriere Pharmacie de la Cote, Bali, Douala, Cameroon. Tel: +237 3342 24 94

Tunisia Office: Rue du Lac D’Ourmia, Les Berges du Lac, Tunis 1053, Tunisia. Tel: +216 71 962 590Kenya Office: Jumuia Place, Lenana Road, Nairobi, Kenya. Tel: +254 722 524 826

Giving investors the opportunity tocash in on high growth potential

BAYO ADELEKEManaging Director& Chief ExecutiveOfficer of FBNCapital

GODWIN OBASEKI Managing Director and ChiefExecutive Officer“Over the last four years, thegrowth of the capital markethas been mainly driven by thebanking sector consolidationand recapitalization. Beforethat, we had a somewhat sleepymarket. Unfortunately, despiteall the positive benefits of re-cent growth, the market hasnot changed in character be-cause the bulk of new investorsare retail. However, we are nowbeginning to see changesthanks to the pension reformwhich has added an importantgroup of domestic institutionalinvestors as well as increasinginterest from international in-vestors. This development ishelping to move the equitymarket more towards an insti-tutional investor base which inturn is driving a lot of reformswithin the market itself interms of governance at both aregulatory and operational lev-el. We have recently conceiveda Vision 2010 for the stock ex-change, by which time we ex-

pect to have implemented a widerange of changes and improve-ments to the market.”

IKE CHIOKE Deputy Managing Director“In order to become one of theworld’s 20 largest economies bythe year 2020, Nigeria wouldneed to achieve an average growthrate of between 10-12% per yearuntil 2020. Last year growth wasaround 7%, meaning that theright decisions at the highest levelwere not made, especially whenyou consider the potential thatNigeria has as an oil and gasproducing nation with a vast

internal market and greatopportunities for infrastructuredevelopment. At this rate, we willnever make Vision 2020.However, I think the situation canbe turned around, but there needsto be greater cooperation andcommitment from the variousarms of government to ensure thatthe right policies are implementedin a timely manner to jumpstartthe economy.”

KAYODE FAHM Executive Director“If you look at our stock marketin US dollar terms, it hasoutperformed pretty much any

other market since 2005. Is thisgrowth sustainable? My feeling isthat the recent volatilityexperienced on the market wasneeded as a corrective factor, butthe potential is still there. The keyingredient will be government andregulators continuing to pushthrough reforms relating to bestpractice as well as deepening andbroadening the market in order tokeep it attractive to investors. Ialso believe that Nigeria willcontinue to benefit from oil pricesunless these suddenly slide, butthis is very unlikely consideringthe demand of the Indias andChinas of this world.”

investment research with a focuson West Africa, Afrinvest hasgained something of a reputationas an innovator.

The firm pioneered Nigeria’sfirst listed US dollar denomi-nated fixed income fund, the Nige-ria International Debt Fund. Italso handled Nigeria’s first bank-ing merger, first cross-borderbanking acquisition in WestAfrica, and first Global Deposi-tory Receipts (GDRs) program,and remains the single largesttrader of GDRs by Nigerian is-suers to domestic and interna-tional investors.

The Banker, a subsidiary of theFinancial Times of London,awarded Afrinvest the 2007 Dealof the Year for innovation andcreativity in the structuring ofthe $350 million Eurobond Issuefor GTBank. Afrinvest was alsothe adviser to Standard Bank ofSouth Africa on the merger thattook place between Stanbic Bankand Chartered IBTC.

The company is managementmajority-owned. Senior man-agement maintains a controlling56 percent interest, with UnitedBank of Africa Asset Manage-ment and Afrinvest Internation-al maintaining 13.3 percent and29.7 percent stakes respective-ly.

With more than 12 years of ex-perience in professional invest-ment management, Afrinvestprides itself very much on its hu-man capital, knowledge, and re-search skills.

“If you are going to invest inthe capital market, you have todo it with people who have theknowledge of the market,” saysMr. Obaseki. “We have the in-formation to be able to deter-mine investment in the market.”

The total of assets under man-agement by Afrinvest fell fromN12.5 billion to N9 billion lastyear as a result of the 2004 Pen-sions Act, which directs that pen-sion funds must be administeredby pension funds administrators(PFAs). However, the acquisitionof a 30 percent stake in First Al-liance Pension (Private) has en-abled the firm to continue to par-ticipate in the pension industry,without incurring extra admin-istrative responsibilities and costs.

Following its mutual fund of-fer, Afrinvest is now planning toraise additional capital throughprivate placement. The overallaim is to raise the firm’s capitalbase to $50 million.

“More reform needed to keep the market attractive”The inside viewfrom the threeleading executivesof Afrinvest

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The investment-banking arm of First Bank plans a series of mutual fund launches

“If you are going toinvest in the capitalmarket, you have to doit with people who havemarket knowledge ”

From left: Godwin Obaseki, MD/CEO, Ike Chioke, Deputy MD, and Kayode Fahm, Executive Director, at the launch of Afrinvest’s Mutual Fund.

Innovation and experience prove a winning combination

www.fbncapital.com

NIGERIA-WSJ 1-4 DRAFT .qxd 17.09.2008 17:35 Página 4

To get an idea of the growing con-fidence that Nigeria’s insurancesector has in its future, you haveonly to take a look at the new cor-porate headquarters that are ap-pearing. “A few years ago, insur-ance companies did not have mod-ern offices,” says one industry in-sider. “Nowadays, we have biggerand better offices. Things are work-ing out well for us.”

The impressive real estate is anoutward manifestation of thegreater financial muscle local in-surers have gained since follow-ing the same successful path of re-capitalization and consolidation astheir bigger brothers in the bank-ing sector.

Previously, there was a pletho-ra of small undercapitalized com-panies, lacking the financial ca-pacity to move the industry for-ward. Forced recapitalization bythe National Insurance Commis-sion, and the inevitable conse-quence of closures, mergers andacquisitions, has changed all that,giving the strengthened compa-nies that survived the processgreater capability and brighterprospects.

According to the National In-surance Commission (NAICOM),the federal government body thatregulates the industry, the min-imum capitalization require-ments now demanded of the in-dustry are the most stringent onthe continent. “Our industry hasthe highest capitalization re-quirement in Africa,” states Fo-la Daniel, the Commissioner forInsurance.

For general insurance compa-nies the requirement was increasedfrom a mere N200 million to N3billion ($25.5 million), while forlife insurance firms it went upfrom N150 million to N2 billion($17 million). For reinsurancefirms it rose from N350 millionto N10 billion ($85 million).

In fact, a number of the sur-viving 49 companies—48 insur-ance firms and one reinsurancefirm—have already voluntarilygone to levels of capitalizationwell above the new minimums.The average capital base is nowN5 billion.

With total capitalization cur-rently in excess of N200 billion($1.7 billion), compared to a pre-consolidation level of just N30billion, the industry is in a strongposition to build on the new cred-ibility bestowed upon it.

After all, while serious chal-lenges remain, the potential for athriving insurance sector in a fastdeveloping economy with a pop-ulation of 140 million and a grow-ing middle class is considerable.This has been recognized on theNigerian Stock Exchange, whereinsurance equities have been thetoast of investors. Insurance is thesecond largest stock traded afterbanking.

“It has become the investors’delight, as evidenced by the Niger-ian capital market where insur-ance stocks have consistentlyranked the most patronized forupward of six months,” says Mr.Daniel.

In the realigned, post-consoli-dation market, companies are fo-cusing on expansion throughstrategic alliances, growth of theirbranch networks, new informa-tion technology systems and staffdevelopment.

The industry has improved enor-mously in terms of wealth man-agement and business planning,opening up a much greater diver-sity of opportunities.

Insurance companies have thecapacity to embark on projectsthat they were unable to under-take before. Moreover, a successfulinsurance sector will benefit notjust the companies’ shareholdersand clients, but also the countryas a whole as it builds to the pointwhere it can play the part of a ma-jor driver of the economy.

Mr. Daniel sees the present stateof the industry as a springboardfor launching it to greater heights.He says it will cease to be the poorrelation of banking and foreseesit investing substantially in sectorssuch as banking, real estate, tele-coms, and oil.

The government’s so-called lo-cal content rules, concerning theparticipation of local insurancecompanies in covering risk in theoil and gas sector, are also set tohave a major impact on the in-dustry (see page 6).

Meanwhile, companies are ex-tending their activities beyond thebig cities, targeting the grassrootsmarket across the country. Somehave taken their business beyondnational boundaries into WestAfrican markets, such as Ghanaand Liberia. It is being predictedthat Nigeria’s insurance marketwill transform into a regionalforce.

The federal government is plan-ning a new insurance act to tight-en up on regulation and give theindustry a further boost. Remi Ba-balola, Minister of State for Fi-nance, says the new law will helpthe industry attract the invest-ment that it needs to realize itspotential.

He says that existing legislationhas held back growth and promis-es a total overhaul to boost con-fidence. He has described theindustry as “on the cusp of a meta-morphosis.”

Further consolidation is ex-pected in the future, this timemarket-driven as the more suc-cessful companies seek to ac-quire the scale to take advantageof this rapidly developing mar-ket.

Moving beyond the national boundariesPromoting itself as a world-class company, ContinentalReinsurance is pursuing an international strategy and extendingits reach across Africa

CONTINENTAL REINSURANCE

Transformed by recapitalization,Continental Reinsurance is on theway to becoming a dominant forcenot just in the Nigerian market butalso across the African continent.

According to Adeyemo Adeju-mo, Continental Re’s Managing Di-rector, the new capital base haschanged the company’s businessoutlook and approach, and it is ina better position to undertake bigticket transactions that will con-tribute significantly to its bottomline and ensure improved returnsto shareholders.

“Since our recapitalization, wehave transformed into a world-classcompany that is professionally andefficiently managed with cuttingedge information and communica-tion technology infrastructure atits disposal,” he says.

Continental Re has been ex-tending its reach into new areasoutside Nigeria, opening branchesin Cameroon, to capture the insur-ance markets in Central and WestAfrica, in Kenya in East Africa andTunisia in the north, as well as in-vesting in Cote d’Ivoire and Mozam-bique. Its target business mix is 10

Investments & Allied Assurance Plc fullyunderstands the human desire to safe-guard the future. Which is why, ever sinceinception in 1969, we’ve put our expertiseto good use: delivering qualitative andefficient customer service as well as tailormade products. We want our customers tobe rest assured and achieve their goals.

www.iaaplc.com

248B Muri Okunola Street off Ajose Adeogun Street, Victoria Island, Lagos Tel. +234 1 271 4028/ 4029

info@iaaplc.com

Business expansion reflects growingconfidence in sector’s potentialEmpowered by recapitalization, the insurance companies haveentered a new era in which they are able to take on risk andembark on projects that would have been beyond their reach

INSURANCE

A major player in a changed landscape Business hasincreasedsignificantly forMutual BenefitsAssurance sincerecapitalization

MUTUAL BENEFITS ASSURANCE

Recapitalization and consolidationhave had a massive and positiveimpact on the perception, perfor-mance, and credibility of insurancein Nigeria. That’s the view of AkinOgunbiyi, Managing Director andChief Executive of Mutual BenefitsAssurance, the insurance companywith the highest paid up capital inthe sector.

Speaking from the firm’s newheadquarters in Lagos, he says theindustry has been positioned to playa key role as the driver of the na-tional economy. “We can see wherewe are going and know that insur-ance as an emerging sector is rel-evant to achieving our vision ofgrowth and development.”

With the liquidity now in the sys-tem, Nigerian insurance firms havecome of age, and will soon be thetoast of their foreign counterparts,he adds. “An industry that used togenerate N100 million a year asgross turnover, with about 50 per-cent as receivables, now has a lotof cash.”

Mutual Benefits itself has beentransformed from a limited liabil-ity company when it started in 1995,with a capital base of N20 million,into a public limited liability com-pany with a shareholders’ fund inexcess of N5.6 billion ($48 mil-lion).

It has emerged from the recap-italization process as a conglom-erate with five subsidiaries, four inNigeria and one in Liberia. Thefirm’s operations now encompassinsurance, asset management, re-al estate, banking, stock broking,and logistics.

Mutual Benefits had $10 mil-lion in foreign inflow during its pub-lic offer, and has to date been ableto attract close to $100 millionthrough a combination of convert-ible bonds and loans to fund theirnew concept of Insurance for De-velopment. Mutual Benefits’ boardhas also approved plans to list onthe London Stock Exchange in thenext three years.

Since the end of the recapital-

ization exercise, the volume ofMutual Benefits’ business has in-creased significantly. Its newstrategic vision has the clear ob-jective of the company becoming“the leader and flagship of insur-ance in Nigeria.”

According to Mr. Ogunbiyi, fur-ther expansion by acquisition liesahead. Negotiations have alreadybeen completed for the purchase of80 percent equity in a leasing com-pany and a 70 percent equity stakein a stock broking firm. At the sametime, Mutual Benefits is makingevery effort to expand itsbranch network to everynook and cranny of thecountry, says the MD.

The company has itsshareholders’ approvalto raise an additionalN10 billion from thecapital market to ex-pand the company’s cap-ital base. According toMr. Ogunbiyi, the fundto be raised will enableMutual Benefits to par-ticipate actively in the oiland gas business.

Mutual Benefitstransacts life and general insur-ance business. The products andservices it offers include generalinsurance, fire insurance, life andpensions, marine insurance, spe-cial products, oil and gas, and mo-tor insurance.

The firm has been involved in re-al estate development and project

financing with state governmentsin Ekiti and Lagos, financing hous-ing, hotel, and other major capitalprojects, in addition to strategic in-vestments in other fields, and iseyeing opportunities in the oil andgas sector abroad.

The company’s annual results for2007 show profit after tax up by48 percent to N1 billion ($8 mil-lion), from N7 million in 2006.

An enthusiastic advocate for in-surance in a country that has yetto take the concept to its heart, Mr.Ogunbiyi is in no doubt that Mutu-

al Benefits’ values, prac-tices, and successes arehaving a tremendousimpact on Nigerianfarmers, artisans,small- and medium-scale entrepreneurs,corporate players, andstate authorities.

“We have come upwith the concept of In-surance for Develop-ment to create tangiblevalues and services forthe insuring public,” hesays.

Mutual Benefits is aregistered member of the Interna-tional Cooperative Mutual Insur-ance Federation (ICMIF), the worldumbrella body of cooperative move-ments. Mr. Ogunbiyi says the com-pany aims to leverage on the 7.5million membership of cooperativemovements in Nigeria using micro-insurance products.

AKIN OGUNBIYIManaging Director& Chief ExecutiveOfficer of MutualBenefits Assurance

“Our insurance industry has thehighest capitalization requirement inAfrica. It has recently become theinvestors’ delight, as evidenced bythe Nigerian capital market, whereinsurance stocks have consistentlyranked among the most patronized.”

FOLA DANIEL, Commissioner for Insurance

Mutual Benefits has become a flagship of the insurance sector.

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percent local to 90 per-cent foreign.

“Our tentacles arespreading around theentire African continent,just as we enjoy affilia-tions and partnershipswith certain Europeanand Asian businesses,”says Mr. Adejumo.

All financial indica-tors showed significantimprovements in thecompany’s 2007 finan-cial year, and the trendhas continued since.First quarter results upto March 31, 2008 showed turnoverincreased by over 70 percent toN830 million ($7 million), com-pared to N487 million in the sameperiod last year. After tax profit wasup by more than 304 percent, toN590 million, from N444 million.

The recapitalization exercisesaw Continental Re—in businesssince the mid-1980s—raising itsshare capital to well over N10billion, a clear indication of theconfidence that investors have inthe company.

Seventy percent of thenew shareholding struc-ture is international.Major stakeholders in-clude reputable corpo-rate bodies and in-vestors, such as theWashington-basedEMP African Fund 11,based in Washington,Rashed Abdul RahmanAl Rashed of Saudi Ara-bia, the CDC Group inLondon, Investech ofSouth Africa, andWealth Insurance of theUnited States.

“Since the investors came in, wehave not changed management, al-though we are trying to strength-en it because the company has grownbigger,” says Mr. Adejumo.

“The current need to strength-en is aimed at being able to copewith what we have. Today, Con-tinental Re benchmarks manyother government-owned rein-surance companies across thecontinent.”

In terms of positioning Conti-nental Re’s brand internationally,Mr. Adejumo says it is importantto get close to the client. “That iswhy we are expanding our officepresence across borders. Aboveeverything, the most importantthing is to provide a good and fastservice, i.e. paying out claims andattracting new clients. Once yousucceed in getting patronage, thebrand will position itself.

“We also make sure our clientsknow that we take keen interest intheir business. Efficient and soliddelivery is our main focus for in-ternational positioning.”

So far, the company has con-centrated on Africa. The MD be-lieves the time to venture furtherafield is getting closer, but first thecompany will need to step up thefinancial ladder.

“We are getting encouragementfrom our shareholders, both localand abroad, to raise additionalfunds. In the near future, when wehave made up our minds about whatwe want to do to capture other mar-kets, we will raise our capital tohigher levels so that we are com-petitive with the companies in thenew regions of the world that weare going to.”

ADEYEMOADEJUMO Managing Directorof ContinentalReinsurance

Continental Re has extended its reach to Cameroon, Kenya, and Tunisia, andis also investing in Cote D’Ivoire and Mozambique.

NIGERIA-WSJ 5-8 DRAFT.qxd 16.09.2008 18:52 Página 1

OIL AND GAS UNDERWRITING EQUITY ASSURANCE

pacity to support governmentagencies and the private sector.

The company has drawn up anew business plan to exploit thegains it made during the indus-try-wide consolidation processwhen, in addition to going to thecapital market for extra funds,it also acquired another insurer,Elmac Assurance. Lasaco shareshave trebled in the last threeyears, and are clearly in demand.

“We are one of the few com-panies that actually raised realmoney during the recapitaliza-tion,” says Olusola Lapido-Ajayi,the Managing Direc-tor. “We are able toinvest a substantialamount of money inour core business, butalso in the way thatwe actually do busi-ness.”

According to Mr.Lapido-Ajayi, the fo-cus is aimed at repo-sitioning the companyto make it dynamicand more responsive.A program of branchexpansion across thecountry is under wayto raise the group’s profile na-tionwide. “We have the ability tobring out more insurance businessand to diversify to every cornerof Nigeria,” he says.

New products are being de-veloped and investment made ininformation and computer tech-nology. “We are making sure thatwe have a real online presence andan interactive website, wherebyour customers can reach out tous and conduct business.

“This is an advantage we didnot have before: the capacity todeliver with fewer costs incurred

by our clients. Our clients canexpect to get good results andprompt settlement of theirclaims.”

Importantly, Lasaco now hasthe opportunity to be a major in-vestor. “We have more funds thana lot of insurance firms,” says theMD. “We are not just looking atLasaco Group as an insurancegroup, but also as a major pro-fessional investor.”

Mr. Lapido-Ajayi says the com-pany intends to raise an addi-tional minimum of N25 billion tosupport its growth plans. “We

are going to raise morefunds so that we willhave the ability to con-tend with the enormi-ty of the opportunitiesthat are open to us, notonly in Nigeria, but al-so throughout WestAfrica—for example,in Ghana, where theyhave discovered oil.”

He believes the com-pany has the potentialto become one of theleaders of the insur-ance industry in the re-gion.

Lasaco’s investment portfoliosrose to N4.3 billion ($37 mil-lion) in 2007, as against N116.9million in 2006. Profit after taxin 2007 was N678 million, asagainst N171.3 million in 2006,a growth rate of almost 300 per-cent.

Shareholders’ funds rose fromN1.5 billion to N6.08 billion. To-tal assets increased to N8.6 bil-lion, compared with N2.7 billion,a growth rate of more than 200percent.

The company transacts allclasses of insurance businesses,

including motor, bond, contrac-tors-all-risk, fire, burglary, avi-ation, marine, general accident,life, pension schemes, engineer-ing, oil and gas.

Launched in 1980 as the La-gos State Assurance Company,Lasaco will continue to provideinsurance cover for Lagos StateGovernment generally, its localgovernment councils and paras-tatals, in addition to competingfor other business in the domes-tic market.

Together with other operators,Lasaco Life Insurance was re-cently appointed by the federalgovernment to handle the grouplife insurance of public sectorworkers. Mr. Lapido-Ajayi saysthis will serve as a springboardfor the subsidiary to register itspresence in the life insurance sub-sector of the market.

Mr. Lapido-Ajayi says Lasacowill be strengthening its hold onits areas of core competence inthe oil and gas and mass transitsectors. Through Lasaco Prop-erty and Investment, it also aimsto get involved in housing devel-opment schemes, both locally andinternationally. “We are not on-ly going to be the sole insurerbut also investors in a housingproject in Abuja.

“We are currently looking atcollaborating with one of ourmajor investors, an investmentcompany of the Lagos govern-ment,” he adds. “Since we area major investor in the econo-my, we have become partnerswith them in several of the pro-grams and they yield good mon-ey for us. We are also workingwith them to invest in a stockbroking firm because they are aspecialized investor.”

Improved financial muscle opens up business and investment opportunitiesLASACO ASSSURANCE

Oil and gas is a ‘vitalsector’ for theinsurance industry

Oil production is the mainstay ofNigeria’s economy. Oil exportsaccount for approximately 95 per-cent of foreign exchange earn-ings, 76 percent of governmentrevenues and around a third of thecountry’s gross domestic prod-uct. The world’s eighth largestoil exporter, Nigeria also pos-sesses massive reserves of natur-al gas—187 trillion cubic feet—and has the largest investment inliquefied natural gas in the world.

And yet the oil and gas indus-try is one from which the Niger-ian insurance industry—alongwith other sectors of the econo-my—has made very little im-pression in terms of direct par-ticipation. No more than 5 per-cent of the oil and gas premiumis retained locally.

Instead the big multinational oilcompanies have been buying theirrisk cover abroad, and hundredsof millions of dollars that couldbe going to local insurance firmsare flowing out of the countryevery year. The total premium forthe sector in 2007 was in excessof $650million.

This is a situation that the Na-tional Insurance Commission(NAICOM) is determined tochange, and it has recently uppedthe stakes. Earlier this year, it de-clared that it was mandatory thatinsured risks in the oil and gas sec-tor must be placed 100 percentwith Nigerian registered and domi-ciled insurers, in line with the gov-ernment’s local content policy. Pri-or to the statement, the governmenthad been calling for 45 percent lo-cal content in the sector.

NAICOM has held a series ofmeetings with the oil majors in-sisting that the energy companiesshow “strict compliance” withthe 2003 Insurance Act and guide-lines it issued last year.

However, while lucrative re-turns from insuring oil and gasoperations may be a mouthwa-tering prospect, Nigerian com-panies have been wary of takingadvantage of local content rulesbecause few have had the finan-cial strength or expertise to un-derwrite the risks. The loss of anoil rig, for example, would in-volve a huge claim on the insur-er’s reserves, while kidnapping,oil theft, and attacks on produc-tion facilities in the Niger Deltapose their own particular prob-lems.

NAICOM has said that in thecase of risks that could not beplaced with a local insurer, itmight allow a company to turn toan insurer or reinsurer registeredoutside the country.

Nevertheless, Fola Daniel, theCommissioner for Insurance,points out that the financial ca-pacity of local firms has beengreatly enhanced and they are ina much better position to take onrisk. Some firms have alreadyboosted their financial resourceswell beyond the minimum re-quirement by going to the capi-tal market and, overall, capaci-ty continues to grow.

Mr. Daniel has also sought toallay the energy companies’ con-

cerns by saying that insurancecompanies seeking to do businessin the sector must acquire ade-quate and valid reinsurance cov-er from reputable institutions.

He says the local content pol-icy is being “fine tuned” to elim-inate hindrances to the partici-pation of locally-based firms.

The insurance industry itself iseager to take on business in thesector and is gearing up to makeit possible. Six of the larger com-panies have banded together toform the First Energy InsuranceConsortium (FEIC), funded to thetune of N3.2 billion ($27 million)with the backing of major inter-national insurance companies.

Other local firms are reposi-tioning themselves to take ad-vantage of the opportunities, andmaking their own joint venturedeals with big international in-surers and reinsurers. The Na-tional Insurers Association (NIA)has drawn up a strategic plan to

increase the participation of itsmember companies.

Inevitably, given the low levelof participation in the sector upto now, there is a need to buildthe skills required for handling thisspecialized kind of business. In-dustry leaders say a collaborativeapproach is needed for the cu-

mulative development of capaci-ty in terms of technical know-how and expertise.

Adeyemo Adejumo, Presidentof the Chartered Insurers Insti-tute of Nigeria, and ManagingDirector of Continental Reinsur-

ance, says, “We have a very biggap in human capital. We needto put a lot of resources into fill-ing it so that we are able to cap-ture a position in the oil and gasindustry. That is why we are join-ing hands with anybody in the in-dustry that wants to train andpartner in a way that will enableus to begin to develop expertisein the oil and gas sector.”

Companies are already estab-lishing departments specificallydedicated to oil and gas insur-ance. As capacity and expertisedevelop, the confidence can beexpected to grow in turn, andNigerian firms to venture furtherinto the sector. Over time, the in-dustry can be expected to under-write the large risks that up to nowit has been unable or unwilling totake on. The result will be a sig-nificant boost in income for localfirms that will benefit both the in-surance market in Nigeria andthe national economy.

Local firms are gearing up to take on thechallenge of covering the energy sectorInsuring risks in the oil and gas industry is becoming increasingly viable as Nigeria-based companies build capacity to enter a section of the market with high profit potential

OLUSOLA LAPIDO-AJAYIManaging Director of LasacoAssurance

Diversification is on the agenda for Equity Assurance.

Total premiums in the oil and gas sector in 2007 exceeded $650 million, but no more than 5% was retained locally.

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Lasaco Assurance is a prime ex-ample of an insurance compa-ny that has seized the opportu-nity of recapitalization to bringabout a transformation in itsoperations and a substantialwidening of its ambitions.

The group of three compa-nies—Lasaco Assurance, LasacoLife Assurance, and LasacoProperties and Investment—israpidly emerging as a one-stopsupermarket for financial prod-ucts and services with the ca-

Equity Assurance, which is of-fering an initial public offer thismonth (the application list clos-es September 30th), is among thecompanies planning to take ad-vantage of the federal govern-ment’s local contentpolicy in the oil and gassector.

Future expansion ofthe insurance industry,says Ibidolapo Balogun,the group’s ManagingDirector and Chief Ex-ecutive Officer, “mustinclude this most vitalsector.” The sector reg-ulator, NAICOM, is de-termined to create abusiness environmentwhere local insurancecompanies will get alarger portion of therisk of the major oilcompanies.

Mr. Balogun believes effectivecollaboration to handle some cat-egories of risk will lead to highperformance in the industry.

Equity Assurance is one of sixinsurance companies to have es-tablished Nigeria’s first oil andgas insurance alliance, First En-ergy Insurance Consortium (FE-IC), which aims to use its col-lective capacity to underwriteenergy business and deepen lo-cal capacity.

The consortium, which made itsdebut last November with equi-ty capital of around $27 million,has the backing of foreign insur-ance partners, including the AceEuropean Group, Zurich Insur-ance, AIG Insurance and CatlinInsurance Company.

“While the major risks willcontinue to be spread worldwide,the local companies should be ful-

ly involved in the spreading of therisks,” says Mr. Balogun. “Thereis also great potential for insur-ance in the energy sector in theGulf of Guinea, because it is morepeaceful and less hazardous.”

Formed by the merger of twocompanies during the recent in-dustry-wide consolidation, Equi-ty Assurance is described by itsMD as customer-focused andproactive.

The group currently compris-es insurance companies in Lagosand Accra and a health insur-ance subsidiary, and has plans todiversify into other areas of busi-ness including hospitality, real es-tate, and leasing.

”Our strategy hasalways been to de-velop specializedcompanies withinthe group in order totake on specificlines of business,”says Mr. Balogun.

The short-termplan is to expandthe distribution net-work and under-write both life andhealth business. Inthe long term, Eq-uity Assurance aimsto become a majorregional group.

The company will shore up itscapital from N3.5 billion to N6billion through a combination ofrights issues and this month’spublic offer, which opened forsubsriptions on September 1st,with the aim of expanding itsbusiness interests and attractinginternational investors.

“Sooner or later, insurance un-derwriting capabilities come downto size, and competition will bebased on value-added services,”says Mr. Balogun. “You can cre-ate a unique product and sell itthrough various outlets but youhave to stay customer-focusedand offer the best value.

“We have redesigned a lot ofdocumentation in order to makeit less bureaucratic and more cus-tomer-friendly. We have differentproducts and services diversityto appeal to a wider range of cus-tomers.”

IBIDOLAPOBALOGUNGroup ManagingDirector & ChiefExecutive Officer ofEquity Assurance

Lasaco Assurance isemerging as a one-stop shop forfinancial productsand services

Equity Assurancewent public thismonth, offering1,500,000,000ordinary 50Kshares at 3.5OKeach

Energy companieshave been told theymust show strictcompliance with localcontent rules

NIGERIA-WSJ 5-8 DRAFT.qxd 16.09.2008 18:52 Página 2

LAGOS

INVESTMENTS AND ALLIED ASSURANCE

Chaos ensued in Lagos, Nigeria’sinfamously congested economichub, when the Third MainlandBridge linking Lagos Island to themainland was closed for twomonths of emergency repairs at thebeginning of August. Work in thecity slowed as commuters battledthrough even worse traffic jamsthan usual to reach their officesin the commercial and businessdistrict.

The good news, however, is thatNigeria’s former capital is on theroad to a major upgrade in its in-frastructure—including con-struction of a Fourth MainlandBridge—that will improve the livesof those who live and work there.

One of the world’s most popu-lous and fastest-growing metro-politan areas, Lagos is the com-mercial and industrial heart ofthe nation, home to the majorbanks and financial institutions,the oil companies, the stock ex-change and most of the firms quot-ed on it.

Local financial institutions arerelishing the opportunities for un-derwriting the infrastructure pro-jects being planned to transformthe city and its satellite town ofLekki.

The State Government of Lagoshas drawn up a $350 million La-gos Infrastructure Project, aimedat developing and improving theroad networks and urban infra-structure.

The public-private sector schemeincludes upgrades and construc-tion of major roads and bridges,including the 95-mile coastal road,the widening of the Lekki Corri-dor and the Fourth MainlandBridge, which the present admin-istration made an election pledgeto build.

The project is expected to attractprivate sector financing, wherebyprivate concessionaires would man-age the roads for 30 years, charg-ing tolls for usage. A consortiumof private sector companies hasbeen undertaking feasibility stud-ies and preliminary engineeringdesigns.

In June, the African Develop-ment Bank Group approved a loanof up to $85 million to help financethe upgrade and rehabilitation ofthe 30-mile Lekki to Epe ex-pressway, the principal artery link-ing Victoria Island with the Lek-ki peninsula.

Situated on the Atlantic Ocean,east of Lagos City, Lekki is thefastest developing area in the state.Chukwuma Soludo, the Governorof the Central Bank of Nigeria, hastipped it as a future internationalfinancial services center that couldbecome the financial hub of Africa.He envisages users of the Lekki Fi-nancial Corridor being able to con-duct their business as if they werein London, New York, or Malaysia.

Lagos State Governor, Ba-batunde Fashola, says Lekki will

be transformed into a new city. Adraft comprehensive infrastruc-ture and land use plan for the areaincorporates a free trade zone, adeep seaport, a center of industrialactivities and employment, a newairport, two alternative highwaysto the Lekki-Epe expressway, pow-er plants, and an international golfcourse.

The plan, a partnership betweenthe state government and the pri-mary stakeholders in the sub re-gion, proposes dividing the city in-to five development zones focus-ing on tourism, residential, com-mercial, and business uses, but al-so with an emphasis on the envi-ronment and nature conserva-tion.

It provides for a total built-uparea of about 10,380 hectares andwill accommodate a residentialpopulation of about 3.4 millionand a non-residential populationof about 1.9 million.

Mr. Fashola has expressed thehope that the final master planwould be “an investment docu-ment for the entire region, thewhole of Lagos Mega-City and be-yond.”

According to its promoters, Lek-ki Free Trade Zone has been at-tracting millions of dollars in in-vestment. In August, Lekki World-wide Investment signed an in-vestment fund agreement worth$1.5 billion with its US-basedpartner, AYR Logistics.

One of the most strongly capitalizedinsurance companies in Nigeria, In-vestments & Allied Assurance (IAA)has been building its financial ca-pacity to take advantage of the in-creasing opportunities for growthand profitability it foresees for thosecompanies equipped to handle them.

Incorporated under the name ofMilverton Insurance Company in1969, IAA was acquired by a groupof investors from the founding own-ers in 2004. During the insuranceindustry’s recapitalization exercise,the company raised its funds to N4billion following a successful pri-vate placement.

“There was a very strong andsuccessful reformation and cap-italization of the banking indus-try in Nigeria, and after the suc-cess of the consolidation and re-capitalization of the banking sec-tor, the insurance sector followedsuit,” says Funmi Adenmosun,IAA’s Vice Chairman. “It was atthis stage that we realised the po-tential this industry still had tofulfil. The consolidation of theinsurance sector signified a fresh,new start for the industry as awhole, and a brand new confi-dence to invest locally and off-shore.”

Consequently, IAA has focusedon beefing up its capacity and cap-italization in order to be a ma-jor player in the sector. Since thelisting in May of its entire capi-tal of 28 billion ordinary sharesof 50 kobo on the Nigerian StockExchange, IAA’s shareholdershave grown from just over 4,000to more than 10,000. Fully paid upcapital now stands at N21 billion($178 million).

The strategy has been sucessful.Olusegun Akinyemi, Managing Di-rector and Chief Executive Officer,says the leading postion that IAA en-joys today in the industry is a directresult of always being ahead of thebenchmarks in terms of capitaliza-tion, and that the company intendsto continue to expand its capitalbase.

“Investments & Allied has been

ahead of most players in the insur-ance industry for quite a few years.Thanks to our effective strategy ofconstantly raising capital above in-dustry minimums and reinvesting inour systems, we gained a leadingposition in the insurance sector thathelped us overcome the last recap-italization process successfully. Infact, I would say that our foresightis what led to our most recent andsuccessful capital raise,” commentsMr. Akinyemi.

Looking ahead, he adds, “Fromthis last capital raising process, we

think we have more than enough tocarry out all our plans for the nexttwo or three years. But when the timecomes, and given offshore interest,we will again raise our capital base.We are also looking to partner withforeign companies in order to achieveour goals.”

IAA recorded a gross premi-um growth of around 73 percentin its unaudited half-year periodended June 30, 2008. Profit af-ter tax jumped to N252.8 million($2 million) from N136.7 million

in the same period in 2007.Some of the fresh funds are be-

ing used to upgrade IAA’s informa-tion technology systems and expandthe firm’s presence across the coun-try. IAA is also looking to play bigin the oil and gas sector by provid-ing insurance there, and one of thereasons it has been eager to raise itscapital levels has been to gain thenecessary financial capacity.

“We are exploring many optionsto ensure that we play a part in thissector, and are currently buildingour human capacity, contacts, and

close relationships with oil andgas companies to secure suc-cessful market penetration inNigeria and elsewhere in Africa,”says Mr. Akinyemi.

Vice Chairman Adenmosunanticipates an upsurge in the in-surance market in the short tomedium term—especially in theareas of oil and gas, capital andcorporate insurance. “Local con-tent will be a crucial factor inthis, and should help Nigeria’sinsurance companies fully capi-talize on the potential this mar-ket has to offer,” he says.

He believes that insurance hasa crucial role to play to enablethe government to stimulate, or-ganize and allocate the coun-try’s resources for investmentaimed at developing sectors suchas infrastructure. “Insurancecompanies have the capacity toaccumulate large amounts offunds from Nigerian stakehold-ers to then reinvest in differentareas of the nation’s economy.”

In terms of market penetration,IAA is targeting every part of Nige-ria as it extends its branch network.Within a year, it aims to be in everystate, and then to extend its activi-ties across the continent.

Says Mr. Adenmosun, “In thenext two or three years, we want tosee ourselves as a prominent mar-ket leader in Africa, but we will bedoing so by partnering with alreadyestablished insurance companies inAfrica, not by going in directly byourselves.”

The consolidation of the insuranceindustry has proved the ideal op-portunity for the country’s oldestinsurer to restructure and developits business as a world-class, one-stop shop for non-banking financialservices.

In line with the government’s con-solidation program, RoyalExchange Assurance,which began life as abranch of the UK’sGuardian Royal Exchangein Lagos in 1921, dividedits insurance business be-tween two subsidiaries.Royal Prudential Life As-surance now covers life risk,while general non-life riskis handled by Royal Ex-change General Insurance.Other subsidiary compa-nies handle healthcare andpension fund management.

In addition to upgradingoperations and human re-sources, the board of Royal Ex-change Assurance commissionedmanagement consultancy Price-waterhouseCoopers to help devel-op its strategic planning for thechanging financial market land-scape. The goal is to become a one-stop shop and prominent player inthe non-banking financial servicesindustry.

“Our objective is not to be a greatNigerian or a great African com-pany, but rather a world-class com-pany,” says Group Managing Di-rector Allan Walmsley.

This will require growth throughacquisition, as well as organically.“We have already identified a num-ber of acquisitions that we will bemaking within the next year toachieve that objective,” he says.

According to Yinka Faboade,Managing Director of Royal Ex-

change General Insurance, the fo-cus of growth for the insurance sideof the business will be on the do-mestic market, which has much tooffer by way of potential.

“In the short to medium term ourexpansion plans are confined toNigeria only,” he says. “We have

a lot to do and a long way to go interms of meeting domestic demandand in positioning ourselves local-ly as a world class, direct insurer.

“Some of our competitors are ex-panding into East Africa, but if youtake Kenya, there is a populationbase of only 30 million and the in-surance market is already saturat-ed with very competent local op-erators. Nigeria has a populationof 140 million and a lower pene-tration level. We believe that we

need to tap the opportunities onour front doorstep first.”

Royal Exchange Assurance hasclearly been making inroads into thispotential market, as it saw premi-ums rise in the first quarter of 2008by 32.24 percent to N899.4 mil-lion ($7.6 million). But, with in-surance penetration in Nigeriastanding at just 0.6 percent, thereis clearly a great deal of scope forgrowth, observes Mr. Faboade.

“At the moment, insurance pro-visioning in Nigeria is restricted tohigh net worth individuals and cor-porations. There is a whole marketout there that is unaware of the ben-efits that insurance can bring them.”

Aside from personal life and gen-eral insurance, the group also plansto tap into the corporate market,serving the needs of the real es-tate, maritime, telecommunica-tions, and transportation sectors.“There is also the underwriting po-tential of the oil and gas sector,where we are far from reaching thegovernment’s local content target,”says Mr. Faboade.

To exploit this and to fund strate-gic acquisitions, however, Royal Ex-change Assurance needs to raisemore capital, and it has set a tar-get of N8 billion. “We need to quick-ly position ourselves in terms of non-banking financial services and con-sequently we will apply a certainamount of the capital to achievingthat,” says Mr. Walmsley.

“Meaningful participation in theoil and gas sector also requiresbuilding capacity, so a large por-tion of the funds will be retainedwithin our general insurance sub-sidiary.”

For now, he expects the lion’sshare of new capital to come fromthe local market, but he predicts thiswill change as the company ex-pands. “When the penetration lev-el gets to, say, 6%, then I would ex-pect more interest from the foreigninvestor community.”

Restructuring advances ambition to be a world-class player

ROYAL EXCHANGE ASSURANCE

Satellite town of Lekki tipped to become an internationalfinancial services center serving the whole continent

Royal Exchange Assurance group aims tolead in non-banking financial services

IAA is extending its network across the country and eyeingthe rest of the continent

UNION ASSURANCE CO. LTD…AN ASSOCIATE OF UNION BANK OF NIGERIA PLCThee strongg && reliablee insurer www.unionassuranceng.com

When it comes to insurance,reliability is key.So let Union Assurance,leaders in fire, automotiveand general accident insurance, keep you covered.

We spur you on to lead a full life

Lagos is the commercial and industrial heart of Nigeria, home to the major banks and financial institutions, the oilcompanies and the stock exchange.

Major plans to improveinfrastructure of fast-growing city

Positioning for bigticket transactions

ADVERTISEMENT

Nigeria

YINKA FABOADEManaging Director& Chief ExecutiveOfficer of RoyalExchange GeneralInsurance

ALLANWALMSLEYGroup ManagingDirector of RoyalExchange Assurance

OLUSEGUNAKINYEMIMD/CEO ofIAA

FUNMIADENMOSUNVice Chairmanof IAA

“There is a wholemarket out there that is unaware ofthe benefits insurancecan bring”

“IAA’s leading position inthe insurance sector isa direct result of italways setting industrybenchmarks in terms of capitalization”

NIGERIA-WSJ 5-8 DRAFT.qxd 17.09.2008 13:48 Página 3

Home or away: the debate goes on

Are some Nigerian insurance com-panies trying to run before theycan walk? Justus Uranta, Man-aging Director and Chief Execu-tive of Niger Insurance, one ofthe country’s biggest insurers, be-lieves some of them may be.

In the debate over whether firmsshould be concentrating on ex-pansion at home or abroad, Mr.Uranta strongly favors giving pri-ority to the domestic market.

He points out that, while somecompanies are busy expandingtheir activities to smaller countries,Nigeria itself has enormous po-tential for insurance that has hard-ly been scratched.

“How can you leavea market of 140 mil-lion people?” he asks.“Insurance depends onlarge numbers. Weshould tap into themaximum potential fora big life market be-fore we move out tosmaller markets. Whenyou have properly es-tablished your practice,then you can go and es-tablish yourself inGhana or Liberia.”

Nigeria, he contin-ues, is an oil rich coun-try, where per capita income ishigher than in most African coun-tries. “You can convince morepeople to buy insurance here, andthus accumulate more funds. Weneed to convince our people to en-joy the benefits of insurance be-fore expanding into other areas.”

Over the course of this year, thecompany has set up an addition-al five branch offices, bringingthe total number of outlets na-tionwide to 41. The aim is to ex-pand the network to 50 branchesby this time next year, with the ul-timate objective of providing in-surance services to every part ofthe country.

Only one of the new branch-es is in Abuja. The rest havebeen opened in rural areas aspart of the company’s strategyof providing services for the 70percent of Nigeria’s populationof 140 million that lives in thecountryside.

“In rural areas, you bring downthe risk factor and have high prof-itability because the claims arelow and they leave you a goodmargin,” says Mr. Uranta. “Giv-en the size of the country, we wantto make sure that we are presentin every nook and corner.”

The company is interested inpartnering with banks and hasformed a strategic alliance withAfribank to extend the availabil-ity of its products though thebank’s infrastructure.

Customized products are beingdesigned based on the needs andfinancial capacities of the ruralpopulation. Two innovative spe-cialist products that have recent-ly been introduced are the BoatTravelers Insurance Policy, forsale in the country’s riverine ar-eas, and the Mutual Hallal In-surance Policy, an Islamic-basedpolicy with which the companyhopes to attract Muslim customers

in the north.“Apart from the

packages that are do-ing well in terms ofpremium income, wehave been improvingour service by bringingNiger Insurance intoareas where it wasthought that people didnot believe in insur-ance,” says Mr. Uran-ta. “We have confi-dence that we are themost popular insur-ance company in Nige-ria due to the special-

ization of our products.”Niger Insurance is certainly a

well-established presence on theNigerian insurance scene, datingback to 1962 when it was a spe-cialist life insurance company un-der the name Yorkshire InsuranceCompany. Since then it has seenmany changes, including listingon the Nigerian Stock Exchange,but the most significant transfor-mation came when it emergedfrom the recent industry-wide re-capitalization with a N13.5 bil-lion ($115 million) asset base andN5.5 billion in share capital, mak-ing it one of the most highly cap-italized insurance institutions inthe country.

Profit after tax in 2007 wasN657 million ($5.5 million), asagainst N589.5 million the pre-vious year.

The company is planning toraise between N10 billion andN15 billion through a public of-fer. According to Mr. Uranta, theadditional funds will be used toadvance the company’s expan-sion plans, upgrade its informa-tion and communications tech-nology, and develop new prod-ucts and its human capital.

“People are surprised that we

are not looking for as much mon-ey as smaller companies that arelooking for N20 billion and more,”he says. “Smaller companies needincreased capital to establish whatNiger Insurance already has, interms of asset base and humancapital development. We do notneed more because we alreadyhave the infrastructure.”

Mr. Uranta believes that the in-

surance industry still has a longway to go in terms of stabilizingits structures and building suffi-cient confidence. “In developedcountries, somebody who acquiresan asset will normally considerinsuring it. In Nigeria, somebodywho spends N20 million in orderto acquire an asset is not neces-sarily thinking of insurance. Whyis this so? Because there is stillapathy and a lack of confidencein the industry.”

Nevertheless, he is optimisticabout the future, both for the in-dustry in general and for NigerInsurance in particular, ob-serving that insurance compa-nies’ share prices and accountsover the last year suggest thatNigerians are starting to em-brace the industry.

Grassroots development comes first saysNiger Insurance as it extends its networkinto the country’s rural areas

JUSTUS URANTAManaging Director& Chief ExecutiveOfficer of NigerInsurance

Innovative specialized products tailored to meet the needs of niche groupsare being developed by Niger Insurance.

NIGER INSURANCE

A mutually supportive relationship withUnion Bank is the foundation upon whichUnion Assurance has built itself into a sig-nificant player in the insurance market,providing insurance and insurance-relat-ed services both to individuals and corpo-rate bodies.

“We are highly regarded because ourapproach to business is responsive and be-cause we have deployed infrastructuresthat would not be available to smallercompanies that do not enjoy a relationshipwith a strong and well-established banklike Union Bank,” says Theo Eke, thefirm’s Managing Director and Chief Ex-ecutive Officer.

It is a connection that Union Assurancewill leverage when it goes to the capitalmarket for additional funds this year.“People are very aware that Union Bankis a global bank, and that it has the po-tential to attract much foreign invest-ment,” says the MD.

Licensed in 1994 to carry on the busi-

ness of life and general in-surance, Union Assurance hasestablished its position in theindustry with a range of prod-ucts and services, rangingfrom personal pension plansand mortgage protection in-surance to aviation and oiland gas insurance.

The company has a strong fi-nancial base, a well-equippedoffice with modern informa-tion technology, and a skilledworkforce. It’s present paid-up share capital is N5.2 billion(around $43 million).

Profit for the period endedDecember 31,2007 increased by 38.7 per-cent to N151.4 million ($1.2 million),from N109.1 million in the previous year.Mr. Eke says that since the consolidationof the industry, the reputation of insurancecompanies has improved both their rateof returns and quality of service.

“We have solidified our po-sition as a major player in theNigerian insurance market.Ourcompetitive advantage lies ininsurance against fire, followedby car insurance, and then gen-eral accident insurance,” hesays. “The company has estab-lished itself at the retail end ofthe market as a reliable serviceprovider.”

Currently, Union Assurancehas plans for fund raising ini-tiatives aimed at bringing inapproximately N10 billion ($86million) in the course of a year.According to Mr. Eke, “Many

investors have shown their readiness to buythe shares of the company.”

The primary objective is to consolidateUnion Assurance’s presence in the do-mestic market before seeking to extend itsactivities to other countries. Apart fromtraditional insurance underwriting, the fo-

cus is on providing customer-driven andafter-sales services.

“We believe that we have a great win-dow of opportunity,” says Mr. Eke. “Wedo not want to rush into establishing apresence on the west coast because—when you analyze the various regionalapproaches to business—there is notmuch uniformity.

“Recently, more and more foreign com-panies are starting operations here. Need-less to say, West Africa is definitely a pos-sibility, but first we want to do some nec-essary research and feasibility studies.”

Commenting on the low penetration rateof insurance in Nigeria, Mr. Eke says theinsurance companies need to show moredetermination to get their message acrossto potential clients. “This is a longstand-ing problem in the industry. We need tostrive harder in terms of branch network-ing, advertising, vision, corporate citi-zenship, and events sponsorship.

“The economy clearly has a huge im-

Consolidation at home before expansion abroad says firm seeking extra fundsUNION ASSURANCE

THEO EKEManaging Director& Chief ExecutiveOfficer of UnionAssurance

Looking to thefuture as well asthe bottom line

CAPITAL EXPRESS ASSURANCE

While some companies are hap-py to focus on the undoubted po-tential of the domestic insurancemarket, Capital Express Assur-ance is firmly on the side of cast-ing its net wide.

At home, one of Nigeria’s lead-ing life insurers is busy reposi-tioning itself as a financial ser-vices provider. However, phasedinternational expansion into oth-er African markets is also a keypart of its growth plan.

“We believe that a key aspectof proper businessmanagement is thehandling of the mar-ket risks,” says TonyAletor, Managing Di-rector and Chief Ex-ecutive Officer. “In-ternational expan-sion, in our mind, pro-vides an excellenthedge against mar-ket risks.”

The company, heexplains, is lookingto the future. “Ourbusiness motive is notprofit for today. Thebigger considerationis to build an institution that willsurvive and outlive us.”

Capital Express has invested$10 million in international ex-pansion, acquiring three life in-surance companies in the WestAfrican region—in Ghana,Liberia, and Sierra Leone. It isalso looking closely at the SouthAfrican insurance market.

“We have taken the brand be-yond the shores of Nigeria in-to Africa. So indeed we are aninternational brand,” says Mr.Aletor.

This readiness to move intonew areas of business also appliesat home. In February, the com-pany was rebranded as CapitalExpress Assurance, announcingthat it would be implementingan extensive business develop-ment program to expand itsbranch and agency network, de-velop new products, and buildthe necessary support infra-structure.“We want to build theoperational infrastructure andcapacity,” says the MD.

Incorporated in 2000 as Cap-ital Express Insurance, in 2006the company acquired the lifeportfolios of 13 composite in-

surance companies and success-fully merged with another life in-surance company, adding an ad-ditional 50,000 clients to itsbooks.

Profit after tax increased by23.2 percent to N311 million($2.5 million)in 2007, fromN253 million in 2006, while thefirm’s total assets increased toN4.4 billion from N2.8 billion,and shareholders funds rose fromN2.1 billion to N2.6 billion.

According to Mr. Aletor, thecompany’s vision forits domestic opera-tions is “to set the di-rection for the life in-surance business inNigeria.” At the sametime it is already start-ing to move into oth-er areas of the finan-cial services sector.

Subsidiaries havebeen set up in assetmanagement, leasing,stock broking, andhealth managementto complement thecore life insurance ser-vice in line with the

company’s vision of providing itsclients with a complete financialprotection and wealth manage-ment solution.

Ultimately, the Capital Ex-press brand will be the flagshipfor quality risk protection andwealth management acrossAfrica, Mr. Aletor says.

“Without any doubt, we aretrying to improve African busi-ness. In five years time, whatev-er happens—even if the econo-my of the world slows down—wewill have enjoyed a lot of invest-ment and the company hasplanned for it.”

According to the MD, there isno immediate need for CapitalExpress to list on the stock ex-change. “Much of the acquisition,expansion and development workthat we are implementing is self-financed.”

He predicts market drivenmergers in the insurance sectorin the next few years as compa-nies seek to consolidate their po-sitions. “The last government dida lot in the area of reforms. Wehave to be patient and see the di-rection of the current adminis-tration as regards reforms.”

TONY ALETOR Group ManagingDirector & ChiefExecutive Officer ofCapital ExpressAssurance

Union Assurance believes there is much to be done in the insurance sector at home before looking further afield

Capital Express Assurance is taking its brand outside Nigeria while expanding itsdomestic branch network

The company plans toraise N10-15 billion to fund its plans forexpansion andupgrade

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Nigeria

pact on the way business is conductedin the market, and we definitely aim togrow to achieve a greater capacity. Asthe middle class grows stronger, an in-creasing number of people will be em-powered to buy insurance.”

PANORAMA REPORTS LTD.WOULD LIKE TO THANK:* Dr. Emmanuel O. Egbogah,

Special Advisor to the Presidenton Petroleum Matters

* Minister Odein Ajumogobia,(SAN) Minister of State forEnergy of Petroleum

* Lamido Sanusi,Executive Director, Risk Managementand Control, First Bank

* Chief Chamberlain Oyibo, Chairman,Centre of Petroleum Information

* Yemi Soladoye,CEO Riskguard-Africa (NIG) Ltd

* Adeniyi Elumaro, CEO Integrated

NIGERIA-WSJ 5-8 DRAFT.qxd 17.09.2008 13:58 Página 4