Buhari submits 2020-2022 medium - term expenditure framework: This is how it affects NAICOM and insurance sector

Nigeria's President Muhammadu Buhari has submitted the 2020 to 2022 Medium-Term Expenditure Framework and Fiscal Strategy Paper to the National Assembly for approval. This move marks a significant shift towards a January to December budget cycle in Nigeria. To discuss the impact of this change and other related topics, Kayode Akindele, Partner at TIA Capital, recently joined CNBC Africa for an insightful discussion. One of the key points raised during the interview was the importance of aligning Nigeria's budget calendar with the private sector's planning cycles. Akindele highlighted that having a predictable budget timetable allows companies and individuals to plan their expenditures effectively. He articulated that a delayed budget approval, as seen in previous years, hampers implementation and creates uncertainty. By reverting to a January to December budget cycle, stakeholders can better anticipate budget outcomes and make informed decisions based on the approved fiscal plan. A significant observation made by Akindele was regarding the budget estimates for 2020 compared to the previous year. Nigeria is set to increase its budget to 9.12 trillion dollars for 2020, up from 8.9 trillion dollars in 2019. Despite the higher budget, concerns were raised about the country's ambitious revenue targets. Akindele noted that while there have been improvements in non-oil sector revenues, they have not met expectations. This shortfall has led to a disconnect between revenue projections and actual collections, necessitating increased borrowing to bridge the gap. Akindele stressed the importance of setting realistic revenue targets to ensure budget feasibility and successful implementation. The conversation then shifted towards Nigeria's insurance sector recapitalization. Akindele shed light on the challenges facing insurance companies in meeting the recapitalization requirements set by the National Insurance Commission (NAICOM). Out of the 57 registered insurance companies and two reinsurance firms, only 47 have submitted their recapitalization plans. Among the submissions, 26 received no objections, while 17 were asked to resubmit focusing on paid-up capital rather than shareholders' funds. Akindele attributed the slow progress in the insurance sector recapitalization to several factors. Firstly, he noted that the sector is not growing as rapidly as desired, leading to subdued business performance. Additionally, the lack of robust capital markets in Nigeria poses a challenge for insurance companies seeking capital infusion. Akindele highlighted the limited avenues available for raising capital, with the absence of IPO-friendly platforms hindering their fundraising efforts. He emphasized the importance of attracting diverse sources of capital, such as international investors, to meet the recapitalization requirements. As the deadline for insurance sector recapitalization approaches on June 30, 2020, stakeholders in the industry are urged to strategize effectively to meet the regulatory mandates. Akindele's insights underscore the importance of enhancing revenue generation, aligning budget targets with actuals, and exploring varied capital sources for sustainable growth in Nigeria's insurance sector. In conclusion, Nigeria's budget calendar realignment and insurance sector recapitalization efforts are crucial steps towards fostering financial stability and sectoral growth. These developments demand proactive measures from policymakers, regulators, and industry players to navigate the evolving economic landscape successfully.