By YINKA KOLAWOLE
Low level of insurance awareness and penetration in Nigeria has been identified as one of the factors hampering the development of the nation’s housing sector.
Managing Director, Union Assurance Company Limited, Mr. Godwin Odah, noted in a statement that no economy can thrive without a vibrant insurance sector which can breed entrepreneurship that will in turn, lift the housing sector. He asserted that insurance provides a platform for mobilising funds, which is critical to housing development. “We need long term funds in the housing sector, which is what life insurance provides,” he said.
The Union Assurance boss noted that there is currently acute shortage of long-term funds which entrepreneurs need to grow the economy, because Nigerians are yet to appreciate life insurance as a natural way of saving for their long-term needs. “Life insurance comes in the category of 5, 10 and 15 – year plans and so on.
If a sizable number of Nigerians, with the country’s huge population, invests just a small proportion of their income in insurance, the economy will expand because the money will be made available to investors who can then grow their businesses on long-term basis,” he explained.
According to Odah, funds at the disposal of banks are short-term in nature and most times, have a tenor of 90 days. “With this condition, banks can only lend short-term at high interest rates that are largely a disincentive to the entrepreneur in the real estate business. But the situation will be better if banks had insurance life funds.”
Odah said it’s not possible to achieve sustainable expansion in the housing sector without mortgages which, according to him, will be easier if the insurance component was available to make the dream of housing for all a reality.
“The insurance component takes care of the initial deposit required by the mortgage firms. But because insurance companies are backward in terms of patronage of life products, these long-term funds are not available for development.
Pension funds, which are another component of insurance, have generated within a short period, about N3 trillion. Talks are ongoing to develop a framework for investment of the money for infrastructure development and in other sectors. This is a demonstration of what life insurance funds can do for national development,” he concluded.