A contentious proposal to grant foreign insurance companies tax exemptions on premiums generated from Nigeria has sparked strong opposition from local industry operators, who warn it could distort the market and cripple domestic capacity.
Proposal Threatens Level Playing Field
The suggestion, reportedly part of recommendations under review by the consultancy firm KPMG, seeks to exempt foreign insurers from paying tax on Nigerian-sourced insurance business. Industry stakeholders argue this would tilt the competitive landscape sharply against local companies. This comes at a sensitive time when the sector is undergoing significant rehabilitation, grappling with low penetration rates, and working to rebuild weak public confidence.
Operators contend that granting such tax holidays to foreign entities while Nigerian insurers bear the full tax burden would directly undermine ongoing reforms. These reforms are aimed at building a strong and resilient domestic insurance market. The core argument from the proposal's supporters is that tax exemptions could help deepen insurance penetration in Nigeria. However, local players insist this approach risks sacrificing long-term sector development for questionable short-term gains.
"Penalising Nigerian Insurers in Their Own Market"
Speaking on the development in an interview with The Guardian over the weekend, Alfred Daudu, the former Chief Executive of FSL Insurance Broker Limited, was unequivocal in his criticism. He stated that implementing the proposal would amount to "penalising Nigerian insurers in their own market."
"You cannot be asking local companies to recapitalise, comply with stricter regulations and still pay full taxes, while foreign firms are given tax holidays to compete for the same risks," Daudu explained. "It is not reform, it is market distortion."
He emphasised that while foreign insurers play a crucial role in covering large or specialised risks, tax parity remains essential for fair competition. "Foreign participation should complement, not cripple, domestic insurers. If foreign companies are allowed to underwrite Nigerian risks tax-free, local firms will struggle to compete on pricing, and many could be forced out," he warned.
Reversal of Hard-Won Gains Feared
The current national policy on foreign participation is designed to protect local capacity, ensure value retention within the Nigerian economy, and promote a level playing field. Industry players note that this framework has supported:
- Job creation within the sector.
- Development of local underwriting skills and expertise.
- Sustainable growth of domestic insurance capacity.
Weakening this policy, they argue, could reverse these hard-won gains. The concerns emerge as the National Insurance Commission (NAICOM) is implementing a far-reaching recapitalisation programme. This programme mandates operators to raise significantly higher capital to strengthen their balance sheets and improve claims-paying capacity, a process already placing considerable pressure on weaker firms.
Operators have now issued a clear warning: granting preferential tax treatment to foreign competitors could undermine the very objectives of the recapitalisation exercise and weaken the local industry it aims to fortify.
