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Insurers decry disparity in interest rates paid on escrow account by CBN
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Fola Daniel, Insurance Commissioner
Insurers are not happy that interest rates being paid on money lodged in the escrow account with the Central Bank of Nigeria (CBN) differ from one company to another
They agreed that, the monies were lodged at different times, but are of the opinion that, interest rate payable should be uniform.
It is therefore believed that insurance companies that lodged their recapitalisation fund in the escrow account with the Central Bank of Nigeria (CBN) may not get any additional money on what they had got earlier, as there was not any formal agreement between the apex bank and the National Insurance Commission (NAICOM) as to what the level of interest on the fund should be.
Insurance companies have calculated interest on the escrow account at the rate of 10 percent on the over N80 billion lodged in the account, but got disappointed when CBN paid three percent and less on the money.
For the over nine months period, between February 27, 2007 and November 28 when companies lodged the money, insurers expected as much as N8 billion as interest on the fund. When the money was released in November, there was disparity on rate of interest received, as individual companies got different rates.
Speaking to Business Day, Fola Daniel, commissioner for Insurance said there was no formal agreement with the CBN on what the rate of interest on the fund should be.
He said that the commission has appealed to the CBN to do more than what they have done; to see if they could give better rate to the affected insurance companies.
He, however queried if any insurance company has any written agreement as to how much the rate should be, such person should come up with it.
According to him this is not the first time money would be lodged into the escrow account.
Nicholas Ojinnaka, Managing Director Guinea Insurance Plc noted that the CBN underpaid the insurers, considering the prevailing market rate. He said that the rate which was paid by the apex bank was at their on discretion and not based on a particular structure.
The National Insurance Commission had during the recapitalisation exercise that took place between September 6, 2006 and February 27, 2007 mandated insurance companies raising money from the pubic either by way of public offer or private placement to lodge such money into an escrow account with the CBN.
At the end of the exercise, about 31 firms lodged the fund which is estimated at N80 billion.
It is therefore believed that insurance companies that lodged their recapitalisation fund in the escrow account with the Central Bank of Nigeria (CBN) may not get any additional money on what they had got earlier, as there was not any formal agreement between the apex bank and the National Insurance Commission (NAICOM) as to what the level of interest on the fund should be.
Insurance companies have calculated interest on the escrow account at the rate of 10 percent on the over N80 billion lodged in the account, but got disappointed when CBN paid three percent and less on the money.
For the over nine months period, between February 27, 2007 and November 28 when companies lodged the money, insurers expected as much as N8 billion as interest on the fund. When the money was released in November, there was disparity on rate of interest received, as individual companies got different rates.
Speaking to Business Day, Fola Daniel, commissioner for Insurance said there was no formal agreement with the CBN on what the rate of interest on the fund should be.
He said that the commission has appealed to the CBN to do more than what they have done; to see if they could give better rate to the affected insurance companies.
He, however queried if any insurance company has any written agreement as to how much the rate should be, such person should come up with it.
According to him this is not the first time money would be lodged into the escrow account.
Nicholas Ojinnaka, Managing Director Guinea Insurance Plc noted that the CBN underpaid the insurers, considering the prevailing market rate. He said that the rate which was paid by the apex bank was at their on discretion and not based on a particular structure.
The National Insurance Commission had during the recapitalisation exercise that took place between September 6, 2006 and February 27, 2007 mandated insurance companies raising money from the pubic either by way of public offer or private placement to lodge such money into an escrow account with the CBN.
At the end of the exercise, about 31 firms lodged the fund which is estimated at N80 billion.
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