Nigeria insurance recapitalisation set to support manufacturers

Nigeria’s insurance recapitalisation is expected to strengthen protection for manufacturers facing costly industrial risks.

The conclusion of the sector’s recapitalisation exercise could have a major effect on businesses exposed to risks such as factory fires, machinery breakdowns, marine cargo losses, engineering failures and lengthy business interruptions.

The position was outlined in the June edition of the Pan-African Manufacturers Association (PAMA) report.

For years, the report said, low capital levels limited the ability of Nigerian insurers to take on large industrial risks. Manufacturers looking for broad cover for factories, specialist machinery, engineering projects, marine cargo and business interruption therefore depended heavily on foreign reinsurance.

Although these arrangements offered extra protection, they could raise costs, slow down the underwriting process and, in some cases, make claims settlement more difficult.

The report said: “The implementation of enhanced capital requirements under the Nigeria Insurance Industry Reform Act (NIIRA) 2025 is now expected to change the landscape by strengthening the financial capacity of local insurance companies.

“The reform is designed to create a more resilient insurance industry capable of absorbing larger risks while providing stronger support for long-term economic activities.

“For manufacturers, the implications extend beyond insurance premiums. Better-capitalised insurers should be able to retain a larger share of industrial risks, develop more specialised insurance products and provide stronger support for businesses investing in new production facilities, industrial parks and export-oriented operations.

“The development could also improve manufacturers’ access to project finance, as banks and other lenders typically require comprehensive insurance protection before committing funds to major industrial investments.”

The report stressed that a stronger insurance industry should, over time, give manufacturers more dependable risk protection, greater confidence to invest and a stronger base for industrial growth.

Better-capitalised insurers could also play a wider role in supporting investment in production facilities, industrial parks and export-focused businesses. Their increased capacity to retain risks locally may help reduce some of the reliance on overseas reinsurance arrangements.

The potential benefits could extend to project finance. Banks and other lenders often require businesses to have comprehensive insurance before providing funding for major industrial projects. Stronger local insurers could therefore help manufacturers meet those requirements and improve their ability to secure financing.

The report described Nigeria’s insurance recapitalisation as more than a financial-sector reform, arguing that it could support wider industrial development.

“Nigeria’s insurance recapitalisation is therefore more than a financial-sector reform. It could become an important industrial enabler by positioning better-capitalised insurers as strategic partners in financing and protecting the next generation of manufacturing investments’’.

If the reforms deliver the expected improvements, insurance recapitalisation could give Nigerian manufacturers a more reliable safety net while supporting fresh investment and long-term industrial expansion.

Could stronger local insurers become a key driver of Nigeria’s next phase of manufacturing growth?