When Ayomide Olusesi left Nigeria in 2018 to pursue a master’s degree in the United States, he shared the same hopes as Tosin, his closest friend who stayed back home, completed his postgraduate studies and secured a job in Lagos.
By the end of 2024, Olusesi had been living in his own home in the US, which was financed through a mortgage. He drove a good car, and furnished his home with modern appliances, all backed by insurance.
Back in Nigeria, Tosin was still saving for a car, a home and basic household needs. With limited access to credit, insurance was largely absent.
His struggle mirrors the reality of many Nigerians whose low credit access ultimately prevents them from accessing insurance. Every formal loan in mature markets carries insurance to protect lenders from risks such as death, disability or loss of employment. But Nigeria’s weak credit culture breaks this link.
Read also: Linkage Assurance mobile app to deepen digital insurance access in Nigeria
“It is already a culture in the US and UK to pay for insurance, for everything you buy. So, this has helped in deepening insurance penetration,” Paschal Onyenwe, a Nigerian resident in the US, said.
Onyenwe said one cannot drive a car in the US without having insurance, noting that it is not possible “because if you are caught, you will be made to pay heavily, unlike what happens in Nigeria.”
“I have seen people drive cars in Nigeria without insurance, and they move freely, settling police on the road, but in US and UK, you dare not try it.”
Uche Okugo, chief executive officer, Fastclaim, said in many emerging markets, including Nigeria, there’s a significant correlation between credit culture and insurance penetration.
“A weak credit culture can indeed hinder insurance uptake,” Okugo said, noting that lack of financial inclusion is the main reason for low credit access.
“Limited access to formal credit and financial services can lead to a lack of understanding and trust in financial products, including insurance.”
According to him, in the absence of formal credit, individuals and businesses often rely on informal risk management mechanisms, such as family and social networks, rather than insurance.
EFInA Access to Financial Services in Nigeria (A2F) 2023 Survey shows that the proportion of adults borrowing formally doubled, growing from three percent in 2020 to six percent in 2023.
Still, the proportion of adults borrowing formally remains relatively low at just 16 percent.
According to the report, one in every three (38 percent) adults in Nigeria borrowed in the 12 months before September 2023.
“Although credit uptake is relatively low, there has been an 11-percentage point increase in the use of credit since 2020,” EFIna report said.
The report further said the uptake of insurance remains roughly stagnant and critically low as only three percent of adults – 3.4 million – were reportedly covered by a regulated insurance policy, and the uptake is driven by medical insurance.
“This is a call for further strategic intervention from insurance providers and regulators to deepen financial education around insurance, while also strengthening the value proposition to Nigerians,” the EFIna report stated.
The World Bank defines financial inclusion as access to useful, affordable financial products. Nigeria’s high exclusion rate means large numbers remain economically vulnerable, lacking the credit and insurance safety nets enjoyed in more inclusive markets.
“The knock-on effects mean people without access to affordable credit are at greater risk of debt, mental health issues and can pay a poverty premium of £485 (N256,550) a year for basic everyday essentials such as energy bills, food and transport,” said Tony Craddock, director-general, Emerging Payments Association (EPA).
Read also: Why we need stronger reinsurance capacity in Nigeria – FBS Re boss
According to Craddock, without access to affordable credit, one event can send a person and their family into a spiral of debt that can take years to recover from.
VrivAfrica says the low credit uptake in Nigeria suggests that the eligibility criteria may be too strict and awareness is too low, raising questions about the inclusivity of credit services in the country.
It noted that only three percent of Nigeria’s adult population is covered by regulated insurance policies, noting that the data points to the need for increased awareness and accessibility to insurance products to ensure that the general population has a wider safety net.
Okugo further emphasised the impact of high premium costs, noting that in markets with weak credit cultures, insurers may charge higher premiums to account for increased risk, making insurance less affordable for individuals and businesses.
“However, there’s a flip side. Access to credit can also drive insurance uptake. When individuals and businesses have access to credit, they’re more likely to understand financial products and purchase insurance.”
