The importance of insurance cover for micro businesses in Nigeria cannot be overemphasized, especially in the face of the recent burglary attacks, looting and destruction of shops that followed the #ENDSARS protest in most parts of the country. Findings by MSMEsToday.com reveal that less than 3% of the Micro, Small and Medium Enterprises (MSME) will use business insurance services by 2021. This depict that more than 97% of the MSMEs needs insurance services during the projected year. Findings show that while the number of MSMEs increased over the year, the number of MSMEs using insurance services reduced from 5.43% in 2013 to 3.38% in 2017 and expected to reduce further to 2.09% in 2021.
The projected reduction in terms of MSMEs penetration in the use of insurance services by 2021 is attributable to decrease in MSMEs confidence in insurance services, difficulties in accessing funding, not having enough information to make good decision, little understanding of insurance products among others.
Today, in Nigeria, MSMEs contribute 50% of national GDP, account for 96% of businesses and 86% of employment. Despite the significant contribution of MSMEs to the Nigerian economy, many business owners often do not plan for a worst-case scenario such as fire, floods or some other unforeseen problems that could arise in the course of doing business.
Considering the different sections of MSMEs, Small and Medium Enterprises using insurance services increased from 23,833 in 2013 to 26,322 in 2017 and projected to reach 29,071 in 2021. This represents in terms of total number of SMEs during the period, the penetration reveals that 32.72% of the SMEs subscribed to insurance services in 2013 and in the next four years which ended 2017 about 36.02% of the SMEs procured insurance services. By 2021, the number of SMEs using insurance services in terms of penetration is projected to reach 19.29 representing a reduction of about 46% when compared with 2017.
On the other hand, Micro Enterprises (ME) use of insurance services took a downward trend over the years. In 2013, more than 1.9 million MEs made use of insurance services representing a penetration of 5.38% in term of MEs total number. In 2017, MEs use of insurance services dropped by 31% when compared with 2013 figure represents a penetration of 3.32%. By 2021, about 951,041 MEs are projected to use insurance services, which indicate a penetration of 2.04% as a result of projected increase in the number MEs by 2021.
The sectorial findings on the use of insurance services show that wholesale, retail and agriculture should be the key focus for insurance companies in 2021. The numbers of MSMEs engaging in agricultural sector is projected to grow by 163% to about 22.9 million MSMEs in 2021 compared to just 8.7 million MSMEs in 2017.
Experts believe that the insurance sector is key to the development of MSMEs in Nigeria. The insurance industry is a massive industry providing cover for accident, fire, burglary as well as the auto, oil and gas sectors and so on. With several insurance cover plans for MSMEs like Fire and Special Perils Insurance Plan, Professional Liability Insurance Plan, Product Liability Insurance Plan, Business Interruption Insurance Plan, Commercial Property Insurance Plan, Goods-In-Transit Insurance Plan, Burglary Insurance Plan among other, insurance companies should take advantage of the gap of about 97% by 2021