Chiamaka Ajeamo, [email protected]
Palpable fear of job losses loom in Nigeria’s insurance industry as most operators inch closer to sealing merger and acquisition deals to meet the new minimum capitalisation target set by the Federal Government.
Daily Sun investigation reveals that staff members of some insurance companies expressed concern that the recapitalisation exercise could consume their jobs, especially where new owners of merged companies seek to downsize workforce to cut down on overhead.
“There is this fear that envelopes every worker that at the end of the recapitalisation, the industry could lose about 25 per cent of its workforce,” said a senior staff in one of the firms.
“We feel that this is not the best time to call for this excercise given the current unemployment rate in the country. The government has to do its best to protect jobs; that’s what we want to see” the official said.
So far, about 10 insurance companies have complied with the recapitalisation directive given by the National Insurance Commission (NAICOM) ahead of the June 2020 deadline.
However, nine months into the exercise, no merger deals are in sight although there have been acquisitions.
Latest industry reports indicate that mergers, acquisitions and consolidations, which will be the most likely options to be adopted by insurance firms to meet up their capitalisation requirements aside Initial Public Offers (IPOs), will naturally lead to workers redundancy.
The implication of this looming job losses in the insurance sector will further compound Nigeria’s unemployment market already at tipping point according to latest report by the National Bureau of Statistics (NBS), which showed that about 20.9 million Nigerians are currently unemployed.
Furthermore a recent document from the National Pension Commission (PenCom), revealed that about 324,141 disengaged employees under the age of 50 years, who were unable to secure employment within four months of their retrenchment, have withdrawn N113.2 billion from the N9.3 trillion pension assets by the end of June 2019.
These statistics show that the rate of unemployment in the country is further degrading and with another impending job loss in the insurance sector, tough times await those that would be affected by the new reform, unless adequate measures are put in place to cushion its negative effect.
The Coronation Research, a part of Coronation Merchant Bank, in its latest report projected that mergers and acquisitions will dominate the insurance sector following the NAICOM directive.
The Head, Coronation Research, Guy Czartoryski, stated that NAICOM’s current reform shares essential features with the 2004 reform in the banking industry which reduced the number of banks from 89 to 25 . He argues that the number of insurance companies would also drop from the current 59 companies to about 25 at the end of the current recapitalisation.
The drastic reduction in the number of banks in 2005, triggered massive retrenchment across Nigeria, as thousands of people lost their jobs.
Experts in the industry have indeed affirmed that although the insurance sector recapitalisation exercise will lead to job losses, those that will be left will function more effectively as the sector post recapitalisation will be smaller but stronger.
In an interview with Daily Sun, an insurance expert, Mr. Ekerete Gam-Ikon, said that job losses will surely happen towards the completion of the recapitalisation process principally because persons with new skills set will be required to manage the highly capitalised companies that met the recapitalisation deadline.
Ekerete noted that, post recapitalisation, there will be more investment in technology and partnerships which will demand relevant experiences of people in those areas which will not come cheap, adding that the next biggest challenge will be the utilisation of the capital to generate commensurate revenue to enable investors get reasonable returns on their investment.
He said, “most of the job losses shall affect older professionals unable to adapt to the knowledge and use of today’s technology and pre-empt companies to deliver excellent customer experience”.
On the way forward for employees not to fall victim of job losses, he said, “we need to look on the bright side while there is still time ahead of the completion of the exercise. Professionals and other employees in the insurance industry can anticipate the skills sets that will be needed and choose to immerse themselves in available programmes. More insurance professionals need to understand the basics of machine learning and applications developed for insurance.”
Also speaking in an interview with Daily Sun, former President, Chartered Institute of Bankers of Nigeria (CIBN), Professor, Segun Ajibola, said that a number of personnel will be laid off because of the many consolidation processes bordering on operations, back- up systems, support services among others which will happen in companies after recapitalisation.
He however noted that, redundancy of staff members will be dependent on their skills and quality in terms of mobility, marketability and multi-tasking competency because the technical sections of firms will be expanded and it will require only personnel who can easily shift from certain areas of insurance business to another to be retained.
“When you are talking of consolidation, whether in banking, insurance or any other industry, technology is taking over; the presence of artificial intelligence, Internet of Things (IoT), engineering robotic technology, will have significant impacts on human resources and capital so, it boils down to the ability of employees to be able to multitask, remain mobile and have a high grasp of technological tools”.
“The advice for employees is to get themselves adequately equipped in terms of ability to multitask, ability to remain mobile within a very large spectrum within the insurance segment and outside it. They should make themselves largely indispensable within their organisation so that, if they become redundant in one aspect, they can fit into another role but if you are a straight jacketed employee, technology will displace you”, he emphasised.
For his part, public affairs analyst and public relations consultant, Mr. Ambrose Igboke, said that job losses are inevitable when recapitalisation takes place in the financial, economic and industrial sectors because it eventually causes a reduction in the number of staff members.
He stated that mergers and acquisitions in the recapitalisation process will mean that financial technology is going to be part of it hence, jobs that are executed by over 100 people or more can be done by only 20 people because, financial technology is profound in the society now.
“There will be job losses and Nigerians should brace up for it as it will increase tension in the country because Nigeria’s unemployment rate is already in double digits. I expected insurance companies to invest in agriculture, real sector and financial technology to have gathered curbs, we have in young men and women who are into technology and adopt technology the way India is doing to grow the economy and automatically curb this threat of retrenchment but rather, what they do with funds is to borrow it to commodity sellers, importers and exporters or put it in banks.
Commenting on the way forward for employees he said, “first, all employees of insurance firms should wake up and tidy up their pension scheme to ensure that their companies are actually complying by paying their own portion of the pension funds which they have been deducting from their salaries all these years.
“They should also ensure that their other schemes and benefits such as the National Housing Fund (NHF), health insurance which should be in millions now, are sitting in their accounts; if not, this is the right time to cry out.
“Also, they should start thinking of investment options from now and one viable business investment idea is farming; agriculture which is diversified.
“Job loss can happen to anyone so do not be surprised or believe it cannot happen to you because even managing directors lose their jobs,” he advised.