TABLE OF CONTENTS
Title Page ii
Approval page iii
1.1 Background of the Study 1
1.2 Statement of the Problem 5
1.3 Objectives of the study 6
1.4 Research Question 7
1.5 Research Hypotheses 8
1.6 Significance of the study 9
1.7 Scope and limitations of the Study 12
1.8 Definition of Terms 12
2.0 LITERATURE REVIEW 11
2.1 Historical Development of Insurance Business in Nigeria 16
2.2 Reasons for Insurance Business in Nigeria 18
2.3 The Concept of Local Content Initiative in Nigeria 20
2.4 The Expected Impact of Local Content Initiative of on the Growth and Development of Insurance Industry in Nigeria 22
2.5 Expected Impact of Local Content in Economic Development in Nigeria 24
2.6 The Problems Facing The Insurance Industry 27
2.7 Prospects of Effective Implementation of Local Content Initiative 30
2.8 Reasons for the Introduction of Local Content in Nigeria by the Federal Government 32
2.9 The Task before Nigerian Insurers 34
2.10 The Task before the Government 36
2.11 Problems Facing the Insurance Industry on Local Content 38
2.12 Prospective of Effective Management of Local Content Initiative in Nigeria 40
2.13. Local Content and Economic Development 41
- Research Design 44
3.2 Sources of Data and Instrument for Collection 45
3.3 Population of the Study 46
3.4 Sampling Technique and sample 47
3.5 Description of the Research Instrument 50
3.6 Validation of Data Instrument 51
3.7 Reliability of Data Instrument 52
3.8 Method of Data 52
DATA PRESENTATION AND ANALYSIS
- Data Presentation 54
4.2 Test of Hypothesis 74
- CHAPTER FIVE
SUMMARY OF FINDINGS, RECOMMENDATIONS, AND CONCLUSION
- Summary of Findings 95
- Conclusion 96
- Recommendations 97
Prior to the introduction of local government content initiative, the rate of capital flight from the oil and gas sector was colossal. This trend was not encouraging for a nation that hopes to become one of the 20 leading economies in the world. Therefore in a bid of stem this trend, the federal government in 2007 introduced the local content initiative. This work therefore aims at finding the prospect for growth in the insurance industry. Questionnaires and oral interviews were used in gathering information for this project work. Some insurance companies in Port Harcourt were visited in other to get information for this research project. The theoretical method used to select the sample size for this research work was Taro Yamani; the population of the study was drawn from the branch of some insurance companies in Port Harcourt. The sources of data were both primary and secondary data. Z-Test like scaling method was used for data analysis. It was also used in testing the hypothesis of this work. It was found that the introduction of local content by the Federal Government will enhance the growth and development of insurance business in Nigeria. This has come to stay and will ensure capitalization in the insurance industry. It is recommended that federal government should help in enhancing the operation of insurance business in Nigeria through regulation and implementation.
1.1 BACKGROUND OF THE STUDY
Local content according to Joe Asamoah is an initiative of the federal government to ensure indigenous participation in the oil and gas sector to build local capacity through utilization of local raw material and human resources. It is also describe as the range of benefit the oil and gas industry can bring to the area where it operates or bring a workforce that is skilled (Emmanuel onyeka). The requirement of local content, this requirement is all about how the producer ensure that a certain percentage of the inputs in the production process come from the local sources. It also requires that first considerable be given to Nigeria companies when contracts are awarded fro oil blocks, licence and all other projects. The act defines in Nigeria companies as one formed and registered in Nigeria under the companies and allied Matters Act(CAMA)1990 with not less than 51% equity share owned by Nigerian.
According to Buoyed by the Nigeria oil and gas industry content development (WOGICD) local content which came into existence on April 22, 2010, a growing number of indigenous companies are now playing active role in the industry. But industry analysts say financing and technical experts are major challenges facing local players in the industry.
Meanwhile, Banwo and Igudala 2010 said the idea of enactment of a local content Act was a step in the right direction, as same was meant to reduce capital flight, provide more jobs for Nigeria and generally promote doing oil and gas business in Nigeria by Nigeria, but after 4years there have been modest achievement and improvement in the over all Nigerian value addition to the oil service companies shave an increase in the volume of in-country fabrication. With the above information Nigeria is rate 8th among the major oil producing countries in the must source of revenue earner for the country and has many potential for other sectors. However, it is said to hear that despite the natural endowment while is bless with, its citizen do not benefit from prospect derivable from the sector as out by foreigner.
This prompted the federal government to introduce local content initiative to build local capacity in the oil and gas industry. The quantum leap in the quest to ensure indigenous participation in oil and gas sector. The insurance industry is one of the major beneficiary of the local content initiative. The target that was set by the Nigerian government for local content is 40% by 2007 and 70% in terms of monetary expenditure through deliberation utilization of Nigeria human and material resources. The Directive no 21 of the local content development states that hence forth all project and operation in the oil and gas industry must demonstrate strict compliance with the provision of the insurance Act 2003 and submit a certificate of compliance issued by NAICOM to NCD (Nigeria Content Division0 as part of technical Evaluation Division) as part of technical evaluation requirement for insurance and re-insurance contracts.
For this reason, the commissioner for insurance as of then Fola Daniel held a meeting with representative of the Nigeria National Petroleum co-operation (NNPC), Shell, and other oil and gas firms and representative of the insurance industry that all properties located in Nigeria whether movable or immovable or any insurable interest, liability in relation then to shall be insured with local insurers who may reinsure such liability or properties overseas, where the Nigeria insurance industry lacks the capacity of retain the risk.
1.2 STATEMENT OF PROBLEM
It is important that one major challenge facing Nigeria as a nation is its inability to affect continuity in government programmes and policies. This is because successive governments discard the policies of previous one and introduce theirs. However, we should consider these problems in this work.
- The delay in participation of local insurer in the oil and gas risk underwriting.
- High incidence of capital plight from the country to damage our economy.
- Government lack the political will to enforce policies meant for the benefit of its citizen in Nigeria as a result of foreign power and their back through grant and aids.
- Inadequate local manpower and capacity in the insurance industry to manage the risk in the oil and gas sector which is largely.
1.3 OBJECTIVES OF THE STUDY
The objective of this work is know the impact of local content in the development of insurance business in Nigeria which specific objectives are:
- To determine the benefit which the insurance industry will have from the local content.
- To determine the level of capital flight in the insurance industry since the introduction of the initiative.
- To find out if the government has the political will to implement the local content act for the benefit of all Nigerians.
- To ascertain whether there are available manpower and adequate capacity locally to ensure effective indigenous participation.
1.4 RESEARCH QUESTIONS
The research questions that may expected in this work are as follows;
- Does the government have the political will to implement the policy?
- Do the government and insurance industry have manpower or capacity to boost local content in Nigeria?
- Has the local content initiative stem the incidence of the capital flight on the country?
- What are the likely effect the local content initiate will have in the insurance industry in Nigeria?
1.5 RESEARCH HYPOTHESIS
This can be describe as a statement of fact which must be tested for the purpose of this research work. The null directional hypothesis and alternative hypothesis will be used Udeze (2005).
H0: A local content initiative has no effect on the development of insurance business in Nigeria.
H1: Local content initiatives have effect on the development of insurance business in Nigeria.
H0: The local content initiative has not stem capital flight from the oil and gas sector for the insurance industry.
H1: The local content initiative has stem capital flight from the oil and gas sector for the insurance industry.
Ho: Government does not have the political will to implement the initiative to ensure local participation.
Hi: Government has the political will to implement the initiative to ensure local participation. Ho:There is shortage of manpower and capacity to boost the underwriting of risk in the oil and gas sector.
H1: There is adequate manpower and capacity to boost the the underwriting of risk in the oil and gas sector.
1.6 SIGNIFICANCE OF THE STUDY
This research work, shall be of great importance to institution, individuals, corporate bodies, government agencies, academics and future researchers. It will also help student offering insurance courses to update themselves of the requisite skills to boost capacity and manpower development in the underwriting of oil and gas insurance.
The study will spread the knowledge and understanding of insurance and risk management students.
Nigerians must accept the fact that increase in local content has come to boost the economy since any thing that will contribute to the development of the economy is allowed
Lastly this work will be more important in academic activity and also serve as a secondary, data for student who wills carryout related research studies in future.
1.7 SCOPE AND LIMITATIONS OF THE STUDY
The scope of the study will put a limit on insurance companies in Port Harcourt.
The limitation are as follows:
- Bureaucracy: These could be done when official will want to seek approval from relevant quarters before answering question to ensure that information is not giving to security operative disquised as student.
- Security in Reveling Details: Most firms in the oil and gas industry find it difficult to release or give out relevant information instrumental to carryout this work as the term it confidential.
- Limited Resources: The work of this nature need huge capital to carryout and as a student, it was difficult to carryout this work to extent envisaged due to limited funds.
- The research is constrained by time as she has to combine this research work with other academic work which is time consuming.
1.8 DEFINITION OF OPERATIONAL TERMS
In the process of this work, the researcher made use of certain terms which relate to the topic under study below are the explanation of the these term (Article, 2010).
- Local content: A initiative of the federal government to ensure indigenous participation in the oil and gas sector to build local capacity through utilization of local raw materials and human resources
- Adjuster: This is a professional person who assess losses hence the term adjuster it is primarily used in marine insurance.
- Agent: is a person who acts on behalf of another person called the principal.
- Arbitration According to Nwafor (2005) defines arbitration as a process which involves one or more person accepted by both parties to the disagreement or dispute over a claim.
- Financial Capacity: This means the monetary ability, of a company to carryout a given project. It is usually referred to as capital based in insurance.
- Broker: It is a person or firm exercising professional still and concerned with the placing of insurance business.
- Claims: Claims is a demand by the policy holder payment under the policy when an insured loss occurred.
- Co-insurer: It has many insurance companies that issued an particular risk and share the loss proportionality.
- Commission: Remuneration fee to an agent for the introduction of business for an insurer.
- Brokerage: It is a remuneration fee paid to professionals for the introduction of insurance business.
- Cover Notes: A document issued by insurers, giving temporary cover pending the insurance of a formal policy.
- Captive insurance: Insurance company set up by a parent company in order to insure that parent company risk.
- Equity: The system of law formally administered by the lord chancellor in England.
- Excess: The first portion of loss being as agreed sum which the insurer agreed to bear.
- First loss: Insurance for an amount known to be less than full value of the insured interest in the property at risk.
- Hull: The ship and associated mechinary it is also used for aircrafts.
- Indemnity: It means putting the insured back to the former financial position he was immediately before the happening of an insured event.
- Insurer: A firm registered under the companies and allied matter act (1990) and licensed by the National Insurance commission to transact insurance business in Nigeria.
- Insured: An individual or company that has purchased an insurance policy.
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