By RAYMOND MORDI and BISI OLADAPO
The battle for the soul of NICON Insurance, the flagship of the insurance industry, is currently heating up between the present owner, Jimoh Ibrahim, the lawyer turned businessman, and the federal government. Though there have been a lot of rumblings over NICON for some time. Ibrahim’s worst fears over the company were confirmed two weeks ago with the federal government’s announcement of the dissolution of the board of NICON and Nigeria Reinsurance Corporation. Though he saw the handwriting on the wall much earlier and took steps to forestall it, the recent suspension of NICON’s board, as well as that of Nigeria Re, has eventually confirmed his concerns that some unnamed person(s) or groups are already closing in to snatch NICON from him. Only a few weeks ago, he told the magazine that a group of determined predators was angling to repossess the new-look company.
Before now, there had been misunderstanding between Ibrahim and Nenadi Usman, the former minister of finance, over non-compliance with insurance guidelines and the waiver granted NICON. While commenting on the outcome of the investigation of maladministration and financial improprieties at the National Insurance Commission, NAICOM, on the eve of her exit from off office, Usman had indicated that NICON and Nigeria Re were certified without meeting the stipulated guidelines. In addition, she faulted NAICOM’s issuance of a waiver of N436 million for NICON Insurance.
Taking on Usman on the issue, Ibrahim dismissed the charge of non-compliance with recapitalization guidelines, saying that “the minister misdirected herself”. He pointed out that the annual account of NICON for the year 2005, which NAICOM had approved before the conclusion of the recapitalization exercise, indicates that the capital base of NICON was in excess of the N5 billion required to underwrite both life and general businesses in the country.
But, last week when the takeover was concluded, Fola Daniel, the commissioner for insurance, explained that the suspension of the boards of the companies was to enable government know what is going on in the two companies. “We believe certain things were not well done in the two companies and we decided to suspend the board to enable us know what was going on in there,” he said.
According to the commissioner, for more than two years or so now, the two companies had not been making periodic returns to NAICOM, the supervisory body of the industry, as demanded by the Insurance Act of 2003. His words: “According to the Insurance Act, all insurance companies operating in the country are expected to make returns to the commission periodically. But for some inexplicable reasons, the two companies have failed to do so in the last one year or so. As a responsible regulator, we cannot just fold our arms over that. That is a breach of the law. We need to know what is going on there. And since the boards were not living up to their responsibilities, we decided to invoke the relevant actions of the Act to suspend them.”
Another reason advanced by the government for its action is the inability of the companies, particularly NICON, to settle claims as and when due. “We have been having series of complaints from the public of NICON’s inability to meet claims settlement. The industry is all about confidence and trust. If a company such as NICON is lacking in this respect, it should be a matter for concern”, Daniel said.
But Ibrahim disagrees with these allegations, insisting that since he took over the two companies, they have been making quarterly returns to the commission, a development he describes as a sharp departure from what used to happen in the past. “Since NICON was set up, has it been making returns? But when we took over, we tried to ensure that returns were made periodically to the commission and they have always acknowledges receipts of all such returns”, he asserted.
Unruffled by the recent development, Ibrahim, says he believes in and, therefore, relies on the rule of law as the only solution. He continues: These are old claims we inherited, some as old as the company itself. When we bought the companies we did not tell the government that we would pay all the claims in one fell swoop. “He reasoned that he would not pump so much money into acquiring NICON, and work so hard to reposition it only for some people to hijack it from him at the eleventh hour.
On the granting of a waiver of N436 million to NICON, Ibrahim explains that he was not expected to pay an accumulated 10-year debt owed NAICOM by NICON before he bought over the company, because the share purchase agreement entered into by BPE and AAL states that “the core investor will not be responsible for any liability, which was not disclosed at the time of purchase”.
Specifically, he says that after NAICOM approached the management of NICON that it owed the commission insurance levy to the tune of N436 million, NICON immediately wrote to BPE, which then wrote to the Presidency requesting for a waiver on the levy. “The BPE was granted the waiver by the former head of state, President Olusegun Obasanjo”, Ibrahim disclosed to the magazine.
However, Ibrahim got a court order last August restraining the minister of finance and attorney-general of the federation from investigating NICON, Nigeria Re, UBA Insurance (in acquisition), Bendel Insurance (in acquisition ) and Globe Reinsurance (in merger) when another technical team was appointed to undertake a post-verification exercise of the 71 companies that were said to have cleared the recapitalization hurdle.
NICON’s refusal to allow the committee look into its books was the reason given by Aderemi Babalola, minister of state of finance, for the suspension of the company’s board and management takeover barely two weeks ago. Ibrahim also got another court injunction to restrain the federal government from taking over the companies as well as implement the recommendation of the technical committee’s report.
Reacting to Babalola’s reason, Ibrahim says with the three court injunctions restraining the federal government or any of its agents until the determination of the substantive suit, the ministry’s action was a blatant breach of the rule of law, on which President Umaru Yar’Adua hinges his administration.
According to Ben Okolo, a Lagos-based lawyer, government’s action contravenes the law of the land. He says the implication would come in one of the following ways; government may face contempt of court charges and if this happens, the officer involved may be commuted to prison. In this case, the commissioner for insurance may be found guilty of aiding and abetting contempt. On the other hand, if in the event that the court finds him to be of good behavior, he may be asked to apologize, then the court will give an order to NAICOM to vacate the premises of the two companies.
But Oladele Solanke, a lawyer, calls for caution, saying the reason government gave is not an issue that is in court. He explains: “It is true that the case in court is recapitalization. What government did is a clever way to overreach the other party. I believe that government must be a standard-bearer in ensuring that court orders are not overreached despite the temptation.” He argues that government should have given the court time to settle the matter before it. “In the past, attempt to overreach was a minus to institutional building. What we need now is support for rule of law, so that will be a departure from the past,” he adds.
Oladipo Bailey, former commissioner of insurance, believes that government took the right decision. He says, “as far as I am concerned, I don’t think government has done anything wrong. There are legal issues that have emerged, but because they are regulatory, issues which are an action of NAICOM, which is not appropriate for any court to stop except you want to strangulate the organization. He adds, “in the case of BAICO Insurance, NAICOM instituted an interim board and management to take over the company. The idea is that when we get into such a company we try to bring it back to life and, by the time we finish our job, we move out. I think that is what NAICOM wants to do now.”
But industry observers do not agree with Bailey. Olabanji Okunnola, a policyholder, believes that this is another case of political witch-hunting. Describing the situation as surface dressing, he says, there is more to it than meets the eye. “The more you look, the less you see concerning this matter, which is moving towards reversal of the sake of the two companies. I believe all the parties involved are after their own interest, nothing else,” he told the magazine.
Noting that this development has cast a doubt on the creditability of government privatization exercise, Okunnola told the magazine that it will impact negatively on foreign investment. “Overturn of government policies sends wrong signals to foreign investors. Inconsistency of government policies is not good for the economy, it’s a setback,” he said.
Affirming that ongoing crisis might be sending wrong signals to the outside world, David Mark, Senate president, told the magazine: “I agree with you that we must never send out a wrong signal. I would say that this is probably a mistake. I think they just made a blanket announcement that all boards have been dissolved. If truly you don’t control majority shares in a board then you can’t dissolve it. I saw a letter from the Senate committee on Privatization saying that NICON cannot be part of the boards that have been dissolved because government hasn’t got majority shareholding in it. At this, it will discourage foreign investors from coming because they would assume that a new government could just reverse things overnight. I don’t believe that NICON board is one of those dissolved. If it is, it is a mistake. And since we are going by the rule of law, there would not be any problem in taking a step back and returning to the status quo.”
Kudirat Oladele, a policyholder, is worried because not all the stakeholders involved in the matter understand what is happening. She cannot comprehend how the institution that cleared NICON and Nigeria Re as having recapitalized can turn around to say they have not met requirements, “Is it not the same government that said NICON recapitalized in February that is now saying in June that it did not? We don’t really understand what is happening. On the other hand, why is the company, known to be the industry’s flagship, hiding its books from being looked into if it has nothing to hide? Can a company which paid N6 billion as pension arrears be said not to have recapitalized? There are so many unanswered questions; government should tell us what the fundamental issues are.”
In quick response, the commissioner for insurance cleared the air about payment of pension arrears saying, “We have looked into it very carefully and from what is available to us at the commission, not more than half of what was advertised by NICON was actual payment of claims.”
However, Okunnola assures that the truth about the two companies will be unveiled to the interim arrangement set up by the government.
With the management led by Ibrahim, NICON’s future has improved tremendously since privatization. For instance, the deficit position came down by 60 per cent within one year. In 2006, it stood at N2 billion, as against N4.42 billion in 2005 and N3.1 billion in 2004. Commenting on the progressive performance of the new NICON, Ibrahim says the shareholders’ fund has gone up to N8.1 billion as against N5.3 billion before privatization. The management increased this by almost 80 per cent. This is outside additional excess deposit of about N3 billion in the Central Bank of Nigeria. The robust shareholders’ funds went up by the time those of UBA Insurance (General Business) and Bendel Insurance, bought over by NICON during the last recapitalized exercise, was added to its balance sheet. “Can a management team that has achieved this feat be said to be incompetent as claimed by the finance minister?” asked Ibrahim.
While conceding that it is not proper to comment on an issue that is in court, Funsho Korode, registrar and chief executive officer, Chartered Institute of Personnel Management of Nigeria, said there must be more to it than meets the eye.
He said it is necessary to establish the ambit and influence of the regulatory body, NAICOM, to ascertain whether there is a miscarriage of justice, adding that “If there is a miscarriage of justice, what processes are they supposed to go through in carrying out their functions effectively? For instance, if they owe some arrears of claims or returns to the regulatory body, we should know how much, and since when; and at what stage does it become bad debt”, Korode added, however, that it is inconceivable that both NICON and Nigeria Re would not be unaware of their responsibilities towards the regulatory body. “But if it is a blatant decision not to pay, I would also want to know why they don’t want to pay. Then, I always say that regulatory bodies should not be selective in carrying out their statutory functions”, he explained.
Debo Thompson, chief executive officer, Loftie Natural Therapy Centre, Lagos, says the NICON issue is a legal matter, which should be ironed out legally, from a layman’s point of view, however, she said it borders on breach of contract. Like the other respondents, Thompson opines that the root of the problem lies in the way and manner the privatization of the company was carried out in the first place. This sort of problem, she said, shows the calibre of people at the helm of affairs, adding “it would put off other investors, particularly foreign investors that may be interested in investing in the country.”
Similarly, Joseph Ihesie, the chief executive officer, Ihesie Natural Health Services, Ajuwon, Ogun State, is not happy with the way privatization exercise is taking shape in Nigeria insisting that the issue of privatization is not something you do haphazardly or on impulse. “You must study what you want to privatize very well,” he told the magazine, adding that what is happening to NICON at present shows that there was something wrong with the entire privatization of the conglomerate in the first place. His words: “It shows there is a problem somewhere, that those who had the responsibility of carrying out that function did not do their work very well.”
Ihesie said it is worrisome that government is privatizing a number of institutions and reversing them after a short period of time, adding that this kind of development is another manifestation of the corrupt tendencies of some Nigerians. “How can anyone have confidence in such exercise in future?” he added. “It is a slap on Nigeria as a nation. Internationally our image is being dragged through the mud, because it implies that those who find themselves in such positions of authority are yet to be matured to be there, otherwise they won’t be making such mistakes,” the natural medicine practitioner told the magazine.
Samuel Olayemi, managing director, Mainland Trust, a stockbroking firm, agrees. He says due process was not apparently followed during the privatization exercise, as many Nigerians already suspect. Olayemi wants the federal government to be more transparent in future by throwing the entire process open to competition, rather than dealing with selected bidders. He is, however optimistic that the development would have no direct implication for insurance stocks on the floor of the Nigerian Stock Exchange because the two fir,s involved are quoted on the exchange.
On the way out of the crisis, Abu Yakubu-Uwasi, an insurance broker, says that instead of keeping an antagonistic posture with Ibrahim, government should invite the man and think of a way to bring NICON back from the mire and reposition it. At the end of the day, the operators are optimistic that the industry will come out stronger.
Teslim Sanusi, managing director of Cosmic Insurance Brokers, emphatically states, “At the end of the day, it’s going to be the benefit of all the stakeholders. I mean the insured and all the arms of the industry. I want to assure the public that whatever happens, their funds are safe and that anything government is involved in, ultimately will be in interest of the stakeholders because at the end of the day, government will ensure that their interest is protected.
Though government said it has not taken over NICON and Nigeria Re, but the magazine gathered last week that this may eventually happen. Industry sources told the magazine that the game plan is to recover from Ibrahim what is regarded as a national asset sold wrongly by the past administration of former President Olusegun Obasanjo. Thus, the battle for the soul of NICON has just started. Now, Ibrahim has sued the federal government. Where this development would lead is yet to be seen.
As at press time, last week, the federal government had appointed Funmi Babington-Ashaye, former managing director of Cornerstone Insurance, to head an interim board set up to oversee the affairs of NICON Insurance.
Additional reports by MUYIWA LUCAS and ABIOLA ODUTOLA
