The contrast between Ayomide Olusesi’s experience in the United States and Tosin’s reality in Nigeria is more than a personal story. It is a mirror reflecting one of the deepest structural weaknesses in Nigeria’s financial system. In advanced economies, credit, insurance and asset ownership are tightly linked, while in Nigeria, they are often disconnected. This disconnect has stalled insurance penetration, weakened household resilience and slowed broader economic growth.
Olusesi’s ability to buy a home, drive a car and equip his life within a few years of employment was not driven by extraordinary income alone. It was made possible by a mature credit system where mortgages, auto loans and consumer finance are inseparable from insurance. Each loan is backed by cover against death, disability, loss or damage. In Nigeria, Tosin must first save, slowly and painfully, before acquiring assets, because access to credit is limited and insurance, which should complement credit, remains peripheral.
This gap explains why Nigeria’s insurance penetration remains stubbornly low. According to the EFInA Access to Financial Services in Nigeria (A2F) 2023 Survey, only about 3 percent of Nigerian adults, roughly 3.4 million people, are covered by a regulated insurance policy, largely driven by health insurance. At the same time, formal borrowing, while improving, remains shallow. Adults borrowing formally rose from 3 percent in 2020 to 6 percent in 2023, still far below what is needed to power asset-based growth.
The implication is clear: without credit, insurance struggles; without insurance, credit cannot scale safely.
In nations like the US and UK, insurance is not optional. As Paschal Onyenwe, a Nigerian resident in the US, observes, you cannot legally drive without insurance. Enforcement is strict, compliance is high, and insurance becomes a normal cost of living rather than an abstract product. In Nigeria, by contrast, uninsured vehicles still ply the roads freely, often settling with enforcement officers informally. This weak enforcement erodes trust, discourages compliance and shrinks the risk pool insurers depend on.
Industry experts argue that the problem runs deeper than enforcement. Uche Okugo, chief executive of Fastclaim, points to the strong correlation between credit culture and insurance uptake in emerging markets. Where access to formal credit is limited, people rely on informal safety nets (family, friends and community) rather than insurance. This reinforces a cycle of low financial literacy, low trust and low uptake.
The economic cost of this cycle is significant. Credit enables consumption leveling, business expansion and asset accumulation. Insurance protects those gains against shocks. When both are absent, households become vulnerable. The World Bank defines financial inclusion as access to transactions, savings, credit and insurance. Nigeria’s high exclusion rate means millions are one illness, accident or job loss away from poverty.
EFInA data show that 38 percent of Nigerian adults borrowed money in the year to September 2023, but most of this borrowing was informal. While there has been an 11-percentage-point increase in credit usage since 2020, much of it is driven by vulnerability (medical bills, living expenses) rather than structured asset acquisition. Without insurance, such borrowing can deepen hardship rather than build wealth.
For the insurance sector itself, poor credit culture has direct consequences. Low credit uptake means fewer compulsory insurance triggers, such as credit life, mortgage protection or asset insurance, that naturally expand coverage in other markets. Weak repayment culture also increases risk, forcing insurers to charge higher premiums, which further reduces affordability and uptake. It is a vicious cycle that keeps penetration low and limits industry growth.
Nevertheless, the relationship between credit and insurance also offers a pathway forward. Access to credit can drive insurance uptake, just as insurance can enable safer credit expansion. When lenders require insurance as a condition for loans, coverage rises organically. When borrowers build good credit histories, insurers gain confidence to price risk more competitively. This virtuous cycle is what Nigeria must deliberately build.
To shore up the sector’s credit, therefore, insurers must deepen partnerships with lenders (banks, fintechs and microfinance institutions) to embed insurance into credit products by default. Credit life, asset protection and income protection covers should be simple, affordable and transparently priced. This shifts insurance from a discretionary purchase to a built-in safeguard.
Also, regulators and industry leaders must strengthen enforcement. Mandatory insurance laws, particularly for motor and certain commercial activities, must be enforced consistently. Without credible enforcement, honest policyholders are punished while defaulters roam free.
Likewise, financial literacy must move from slogans to strategy. As EFInA notes, the lack of awareness and understanding remains a major barrier. Insurers need to communicate value, not jargon, showing how insurance protects livelihoods, not just policies.
Similarly, affordability must be addressed through innovation. Micro-insurance, usage-based premiums and digital distribution can lower costs and expand reach, especially for low-income and informal workers.
Furthermore, policy coordination matters. The Central Bank of Nigeria has made strides in credit reporting and financial inclusion. If these efforts are aligned with insurance regulation and supported by data-sharing frameworks, both sectors can grow together.
The stakes are high, as a country where only 3 percent of adults are insured is a country exposed to shocks. A country where credit is scarce cannot unlock middle-class growth. But a Nigeria that successfully links credit to insurance can change household behaviour, deepen financial resilience and stimulate economic expansion.
Olusesi’s story should not be an exception reserved for those who leave the country. With the right reforms, Tosin’s experience can become the Nigerian norm, where credit is accessible, insurance is trusted, and progress is no longer delayed by fear of risk.
