COMPARATIVE ANALYSIS OF THE PERFORMANCE OF THE INSURANCE AND BANKING INDUSTRIES IN NIGERIA

Background: The insurance and banking industries, both of which are components of the Nigerian financial system, play very important role in the country. They jointly for the backbone of the economy without which all economic activities would come to a halt or collapse. There is no doubt that the insurance and banking industries contributed to economic growth and development but how and to what extent they do so is the prerogative of this study. In their joint roles as tools for economic development they converge and diverge at certain points of interest, which characterized the differences and similarities in their setup. It is against this background that I shall carry out a rear exhaustive comparison of the two industries.

Insurance has been in existence and practiced in many ways in our society ever before the colonialists in such co-operative and thrift with group as grades, town unions, Esusu etc with the sole aim of spreading the loss of few amongst many. Modern insurance, however, was introduced into Nigeria as late as 20th century by the British Merchants who had established trading parts on the west coast of Africa. The first insurance company to have full branch office in Nigeria was Royal exchange Assurance Company Limited, which opened it’s office in Lagos in 1921. Until the time of independence in 1960, there was virtually indigenous insurance company in the country. Prior to the incorporation of the first set of indigenous insurance companies insurance business in the country had been underwritten by offices, which were primarily branch office of European Insurance companies. Between the year 1960 and 1975 a large number of wholly indigenous Nigerian insurance companies commenced operation and these companies now under write a substantial volume of the total insurance business in the country. The insurance industry or market in Nigeria has experienced a tremendous growth and development from what it was in the early days of it’s establishment by the British colonialists. The government and individuals have become more aware of the need for insurance in our society and now patronize the insurance industry. The present economic reconstruction programme of the government and it’s subsidiaries in the country. According to statistics carried out in 1989, there existed about 105 insurance companies in the country 81.9% of which were indigenous while, 18.1% is partly expatriate. There are also several insurance brokerage firms, Reinsurance companies, Agency officer, Mutual insurance societies, insurance loss adjusters and surveyors, pensions consultants etc in the country today.

The history of Banking in Nigeria dates back to early colonial period. The activities of transactional corporation, the financial transaction of the colonial government, the decline of the barter system of trade and the increasing acceptance of British silver currency-all these required an institution in the form of commercial bank for the safety and transaction of funds and also for provision of credit to government and trading companies. It was for this purpose that the African banking cooperation based in South Africa was invited by the Elder Dempers & company to open a branch in Lagos followed by the Bank of British West Africa (now known as the first bank), which opened it’s first branch in Lagos 1894. The bank of the British West Africa later superceded the African Banking cooperation and exercised virtual monopoly over banking in Nigeria within that period. From this early beginning, more expatriates Banks continued to open branches in Nigeria until in 1929 when the protocol was broken by the establishment in Lagos of the first indigenous commercial Bank. In addition, there exists the Central Bank (established in 1958) which main objectives is to issue legal tender (currency) in Nigeria, safeguard the international value of the currency, promote monetary stability and a sound financial structure in Nigeria and to act as a financial advicer and Banking industries in Nigeria operated in open and free markets whereby competition is reasonably fair, although government intervenes often to regulate their operations and ensure a fraud free business transaction.