Nigeria’s housing sector will continue to toddle until the insurance sector is given the pride of place. This is because insurance companies are the only ones that can provide the long term funding needed to finance housing development.
These views were canvassed by the Managing Director of Union Assurance Plc, Mr Godwin Odah. Odah who was the lead discussant at the 3rd annual lecture organised by the Lagos State chapter of the Nigerian Institute of Quantity Surveyors, NIQS, described insurance as the mobiliser of long-term funds for infrastructure development.
He posited that the neglect of the insurance sector is the bane of housing development in the country, as the sector is now starved of long term funds needed for housing.
The Nigerian scenario is different from what obtains in other developed economies and South Africa where Insurance companies own banks. According to him, so long as life insurance is neglected, the housing sector will remain distressed because there will be no long-term funds.
The Union Assurance boss regretted that at the moment there is acute shortage of long term funds which should be available to entrepreneurs to invest in growing the economy because Nigerians are yet to buy into life insurance as a natural way saving for their long term needs.
“If a sizable number of Nigerians with its huge population invests just a small proportion of their income to insurance, the economy will expand because the money will be made available to investors who can then grow their business on long term basis”, he said.
Mr Odah noted that the money available to banks today are short term funds that have only 90 days tenure before their owners come calling. With this condition, they can only lend short at high interest rates that are largely a disincentive to property developers.
He explained that the situation would be better if banks had insurance life funds. Noting that it is impossible to achieve sustainable expansion in the built environment without mortgages, Mr Odah explained that mortgages are easier if the insurance component is available to make housing for all a reality.
“The insurance component takes away the initial deposit required by mortgages. But because insurance companies are backward in terms of patronage of its life products, these long term funds are not available for development. Nigeria’s economy can only grow if insurance drives the mobilization of funds.
Pensions funds, which is another component of insurance has generated within a short period about N2trillion. Talks are ongoing to develop a framework for investment of the money for infrastructural development and other sectors. This is a demonstration of what insurance life funds can do for national development,” he said.