BusinessDay 28 Feb 2018

Wednesday 28 February 2018
10 BUSINESS DAY
C002D5556
COMMENT
SMALL BUSINESS HANDBOOK
EMEKA OSUJI
Dr Emeka Osuji
School of Management and
Social Sciences
Pan Atlantic University
Lagos. eosuji@pau.edu.ng @Emyosuji
Poverty reduction war takes back seat
These are by no means
the best of times for our
country Nigeria. The
most dastardly centripetal
forces have been
arrayed against her. And every effort,
including those that are tested
and proved efficacious elsewhere,
have become impotent.The challenge
of poverty, which was one of
her biggest enemies, and against
which microfinancing and other
economic defence strategies were
implemented, has suddenly paled
into oblivion, as more vicious
enemies take the centre stage. As
things stand now, it is hard to focus
on the war against poverty when
the battle field has widened and
become very shifty, as terrorists
ravage the country. A whole region
of the country, the North East, and
several portions elsewhere, are
completely engulfed by a nameless
war, which is at any rate a great war,
by any standard – the war waged by
Boko Haram and herdsmen.
To make matters worse, Nigeria
has just transited power essentially
between two mutually antagonistic
political groupings that are ideologically
hard to distinguish. Those
who inherited power had barely
settled down when the country
was struck by all manner of evil,
akin to share bad luck – collapse
of the international oil market,
declining national output of the
category called recession, and
what may be termed self-imposed
disabilities, including obviously
divisive policies that have widened
and multiplied the national
cracks, turning them into gorges
that may never be filled.
Evidently, a time like these is
usually difficult for any country,
wherever it may be located in the
world. Sadly such times do not
encourage objective assessment
of challenges and hence blur
the choice of effective solutions.
Moreover, most governments
caught up in such situations often
find themselves living in denial,
for a number of understandable
reasons. First, the challenges
they face are usually rooted in
the past and hence there is ample
room for alibi and blame game.
Second, even where there are
obvious errors and issues, such
governments usually prefer to
deny their existence,especially
because it may be dangerous to
easily accept one’s faults when one
has not established a track record
of performance. The result often
is a lot mistrust for government.
As a consequence of this phenomenon,
both at national and
subnational levels, many Nigerians
are viewing the current state
of affairs with sociological detachment.
Those who are apolitical do
not see their role in anything poli-
There is need for a complete
review of the challenges
facing Nigeria, including
poverty... The challenge of
poverty in Nigeria has gone
beyond hand-outs and
on-lending facilities. The
root causes of poverty have
become bigger than the
problem of poverty
ticians do. They sit on the fence. Others
are downright naïve, and do not
see how the crisis in the North East,
for instance, affects them in their
far away regions.They are fine with
the suffering or exclusion of other
groups as long as their group has its
teeth deep in the pie. This kind of
atmosphere is very widespread and
has resulted in what many consider
incongruent policy responses. Today,
most politicians have set their
eyes on 2019 elections without considering
where the country might be
at that time, given the wildly blazing
fire of insecurity and discontent.It is
hard to fight poverty when interests
and attention are so far away from
the challenge of poverty.
Even the youth, however defined,
have joined the fray of blurred
visionaries by seeing only the opportunity
to rule Nigeria rather than
to create solutions to its many problems,
one of which is the absence of
values among the people, including
the youth. It is now the opinion that
the youth have become even more
insensitive to the needs of the na-
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tion than their faltering elders, by
focusing on how to get themselves
into the driving seat of our corruption
called governance, than
seeking how to save the country
from same. What will save Nigeria
is not that young men will take over
from elders but the institutions and
structures that will spew out evil
men from leadership. That is what
we need. The recent campaign for
a reduction of age limits for occupying
top political leadership
positions begs the question. It is a
misplacement of priorities. It gives
the impression that what is wrong
with Nigeria is the age of those
ruling it. Obviously, that would be
a wrong analysis of the challenges
that confront a federation that woke
up one day and discovered that
the regions had been castrated,
dispossessed and handed over to
the central government as vassals.
There is need for a complete
review of the challenges facing Nigeria,
including poverty. Currently,
the microfinance solution has lost
traction, largely for no fault of its
promoters. Although they operate
in different markets, there are
still some commonalities between
microfinance and deposit money
banks. They both need economically
active people, poor or rich, to
serve. It is not realistic therefore to
expect that microfinance banks will
function in places where deposit
money banks avoid, for security
reasons. Such places are increasing
in number and dimension.
The president was quoted recently
as saying:“My government
is working hard to reduce the unemployment
rates through several
programmes and initiatives including
the N-power, agriculture, small
and medium scale businesses, all
of which are supported by government
guaranteed loan scheme.
I encourage you all to key into
any of them for national growth
and development.” Those words
reflect the good intensions of the
president to minimize the hardship
that has become emblematic of life
in Nigeria, not just among the poor
but in more than one way attending
to most people. But even the president
knows that good intensions
will not do. Hand-out type policies
can only fill a gap. Real solutions
are structural and self-propelling
and often viral in effect. The growth
of jobs in a construction site marrow
the growth of a virus. That’s the
need of the times.
The challenge of poverty in
Nigeria has gone beyond handouts
and on-lending facilities.
The root causes of poverty have
become bigger than the problem
of poverty. There is an urgent need
to ask certain questions, which we
have signally avoided. What kind
of businesses are Nigeria’s poor
doing currently into which they
would invest the guaranteed loans?
Is capital the most important problem
facing the economically active
poor people of Nigeria? Given capital,
would they be able to sustain
themselves in view of the security
and infrastructural deficits? Poverty
is complex and its antidotes
need to be even more complex.
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FRANCIS EWHERIDO
Ewherido, the Managing Director of Titan Insurance
Brokers Limited, wrote from Lagos.
One of the biggest challenges
we have with deepening
insurance penetration in
Nigeria is the near absence
of insurance culture. The insurance
culture is either not there or not entrenched.
We do not see insurance as a
way of life that it is. But we live in a very
uncertain socioeconomic and political
clime, which makes insurances even
more imperative. Insurance is life and
ordinarily you cannot avoid insurance
anymore than you can avoid living.
But there are some classes of insurance
that are even more important
to life, especially lives of third parties.
Consequently, government has made
these classes of insurance compulsory.
Perhaps we can start entrenching the
insurance culture in Nigeria by strict
enforcement of compulsory insurances.
Ordinarily, you want people
to take insurance out of conviction
and on their own volition, but if third
parties are involved and some classes
of insurance have been made compulsory
to protect them, then they should
be enforced.
Compulsory insurances are about
third parties, who might die, suffer
bodily injuries or property damage as a
result of actions, inactions, negligence
or carelessness of the insured. The insured,
on his own, might not have the
resources to indemnify (compensate)
the affected third parties in the event
of an incident likely to lead to legal liabilities,
so these insurances are made
Deepening insurance penetration with compulsory insurances
compulsory to ensure that affected
third parties get compensation.
The commonest of these classes
of insurance is Motor (Third Party)
Insurance. This insurance protects
the insured against third party legal
liabilities for death, bodily injuries
and property damage whilst using his
vehicle on the road. There is no limit of
liability for third party death and bodily
injuries because life is invaluable,
but underwriters (insurance companies)
have parameters for calculating
the benefits. Relatives of a deceased
third party, who earned N1m per
annum, for instance, cannot get the
same compensation as relatives of a
third party, who earned N12m per
annum, in the event of death. The
limit of liability for third party property
damage is N1m, but an insured can
increase the limit with payment of
additional premium.
Motor (Third Party) Insurance
premium is N5,000 for private vehicles
and N7,500 for commercial
vehicles. These sums should be within
the reach of every vehicle owner. Unfortunately,
it is alleged that only one
in every eight motor insurance certificates
in Nigeria is genuine. There
were about 11.5 million vehicles on
Nigerian roads as at 2017, according
to the Federal Road Safety Commission.
This means that if all motorists
were to get genuine motor insurance,
about 10 million additional Nigerians
will automatically have genuine motor
insurance and be added to the
insuring pool. This automatically
deepens insurance penetration.
Beyond frustrating efforts to
deepen insurance penetration and
revenue losses to government and the
insurance industry, fake motor insurances
defeat the purpose of compulsory
Motor (Third Party) Insurance
because third parties who die, suffer
bodily injuries or property damage
might not get compensation from the
liable motorist because he does not
have genuine insurance. To ensure that
your motor insurance is genuine, please
go the Nigerian Insurance Industry
Database (NIID), enter your insurance
policy number or vehicle registration
to verify your motor insurance status.
The second class of compulsory
insurance is Professional Indemnity Insurance.
Professional Indemnity Insurance
(PII) is a form of liability insurance
that helps protect a wide range of professionals
and companies from bearing the
full cost of defending themselves against
a tort claim made by a client and damages
awarded in such a civil lawsuit in
the conduct their business. Usually,
professional indemnity is compulsory
for doctors and medical practitioners,
medical establishments, insurance
brokers, lawyers, chartered accountants
and some other professionals, but many
of these professionals do not have this
compulsory insurance thereby reducing
insurance penetration.
In addition, Section 45 of the National
Health Insurance Scheme Act of
1999 specifically requires all medical
professionals, institutions and centres
to have in place Professional Indemnity
Insurance. The law makes provisions
for compensation for the NHIS patients
who suffer death, sickness, permanent
disability, partial disability and injury
from mistakes, negligence, errors
of commission or omission of insured
medical practitioners and institutions.
Many medical personnel and establishment
do not have this all-important
compulsory insurance. And they get
away with it because their patients
have not held them accountable and
nobody has made strenuous attempts
to enforce it.
The third of the compulsory insurances
is Occupiers’ Liability Insurance.
Section 65 of the Insurance Act of 2003
requires the owners or occupiers of every
public building to be insured against
liability for loss or damage to property of
third parties, and death or bodily injury
to third parties caused by collapse, fire,
earthquake, storm or flood. The Act
defines a public building as one to
which members of the public have
access for educational, recreational,
medical and commercial purposes.
You can imagine the level of insurance
penetration if all government buildings
at the three levels of government,
shops, malls, restaurants, offices and
other buildings where members of
the public have access were to take an
Occupiers’ Liability Insurance. Beyond
the penetration, so much wealth and
so many jobs will be created.
The fourth compulsory insurance
is Insurance of Buildings Under Construction.
The Insurance Act of 2003,
Section 64, requires every owner or
contractor of any building under construction
with more than two floors to
take out an insurance policy to cover
his liability arising from construction
risks such as his negligence or that of
his servants, agents or consultants,
which may result in death, bodily
injury or property damage of workers
on site or members of the public.
This insurance policy also covers liability
for collapse of buildings under
construction. A census of buildings
of three floors and above under construction
has shown that many owners
and contractors of these buildings
do not comply with this compulsory
insurance. Meanwhile, some of such
buildings have collapsed over time
and third parties who suffered bodily
injuries and families of those who lost
their lives had minimal or no compensation.
Enforcement this compulsory
insurance will certainly deepen insurance
penetration.
The fifth compulsory insurance
is the Group Life Insurance for company
employees. Group Life Insurance
gained traction since the PENCOM Act
of 2004 as amended in 2014 made it
compulsory for employers of labour in
the private and public sector to provide
a group life cover for their staff. Since
then the number of companies with
Group Life Insurance has quadrupled.
Beyond being mandatory for companies
under the PENCOM Act, you cannot
bid for government businesses and
those of some big companies without a
Group Life Policy for your employees.
This has really helped in deepening
insurance penetration and growing
the insurance industry in terms of
premium income and creation of employment.
It has also helped to drive
the argument that other compulsory
insurances will also gain traction if
there are government policies to compel
potential policy holders to have
these compulsory insurances. But
there is still a long way to go for even
group life insurance because many
companies still do not have Group Life
Policy for their employees.
Finally, though no longer under
the purview of insurance companies,
is the Employers Liability Insurance.
Employers Liability Insurance, as
stated by the Employee Compensation
Act of 2010 (which repealed
the Workmen Compensation Act
of 1987), requires every employer,
within the first two years of the commencement
of the 2010 Act, to make
a minimum monthly contribution of
1% of the total monthly payroll of employees
to the Employee Compensation
Fund. The fund is designated
to pay adequate compensation to
employees or their dependants for
any death, injury, disease or disability
arising out of or in the course
of their employment. The Nigeria
Social Insurance Trust Fund (NSITF)
is saddled with the power to implement
this act.
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