ARTICLE
20 October 2025

The Impact Of Nigeria's Local Content Act On P&I Insurance

PM
PYE·M Systems

Contributor

Pye-M Systems specialise in setting up and providing mutual advisory support for ship owners, charterers, operators, and other stakeholders within the maritime industry, with a focus on facilitating risk pooling and risk retention.

In 1972, the Federal Government of Nigeria issued the Nigerian Enterprises Promotion Decree, more commonly known as the Indigenisation Decree.
Nigeria Transport

In 1972, the Federal Government of Nigeria issued the Nigerian Enterprises Promotion Decree, more commonly known as the Indigenisation Decree. It marked a bold shift in national economic policy: a deliberate attempt to transfer ownership and control of businesses operating in Nigeria into Nigerian hands. For the first time, foreign participation in a wide range of commercial sectors was limited by law, and local equity thresholds were enforced. The policy had challenges, but it sent a clear message: national wealth should reflect national ownership.

One of the legacies of that policy was the transformation of Nigeria's banking sector. Today, Nigeria is one of the few African countries where domestic banks dominate the financial landscape, as ownership shifted to local hands beginning in 1972. These banks are not only holding their own, they are rapidly expanding across the continent, acquiring the African operations of international institutions, as seen in Access Bank's recent acquisition of Standard Chartered's assets in several markets. This is what is possible when localisation is backed by law, capital and ambition.

That same principle continues to guide Nigeria's broader economic strategy.

Nowhere has it been more aggressively pursued in recent years than in the oil and gas sector. The Nigerian Oil and Gas Industry Content Development Act, signed into law in 2010, built upon the indigenisation principles of the 1970s with clearer targets, better enforcement tools, and more precise industry applications. From fabrication yards in the Niger Delta to upstream logistics contracts and vessel support services, the Local Content Act has significantly increased Nigerian participation in the oil and gas value chain. According to the Nigerian Content Development and Monitoring Board (NCDMB), local content levels in key operations now exceed 54% — a sharp departure from the foreign-dominated practices of two decades ago.

But amid these gains, one sector remains conspicuously underdeveloped in terms of local participation: marine insurance, and more specifically, Protection and Indemnity (P&I) insurance.

That gap is costing Nigeria more than lost premiums.

P&I insurance is not marginal. It covers some of the most critical categories of marine cover, protecting vessel owners from liabilities tied to environmental damage, cargo claims, collision, crew injury, and third-party litigation. No vessel can operate in Nigerian waters or participate in upstream oil transport without it. Yet, all P&I coverage in Nigeria is sourced abroad from a network of foreign mutuals based in Europe, Asia, and North America.

This is not only a contradiction of national policy. It is a missed economic opportunity.

Law Exists, But Enforcement Lags

The Local Content Act leaves little room for ambiguity. Section 49 states that "all operators, project promoters, contractors and any other entities engaged in any operation, business or transaction in the Nigerian oil and gas industry shall insure all insurable risks related to its oil and gas business, operations or contracts with an insurance company, through an insurance broker registered in Nigeria". Section 50 goes further, requiring that "no insurance risk in the Nigerian oil and gas industry shall be placed offshore without the written approval of the National Insurance Commission (NAICOM)".

Despite this clarity, the practice continues.

Some might argue that Nigerian participation exists through local brokers who act as intermediaries between shipowners and foreign P&I clubs. But brokerage is not the same as localisation. The goal of the Local Content Act is not to ensure local correspondence, it is to ensure local domestication of risk, capital, and institutional capacity. Correspondence does not build national underwriting capacity, keep claims or reserves in-country, or grow the technical expertise that true insurance localisation requires.

Every P&I policy placed abroad represents a lost opportunity to develop Nigerian underwriting expertise, grow marine legal services, and build reserves that could support reinsurance, claims adjustment, and loss assessment locally. It also contradicts the spirit of the law, which is to retain value within the Nigerian economy, stimulate domestic industry, and build resilience against foreign dependency.

Consider a typical offshore incident, a crew injury or pollution spill from a vessel servicing an oil platform off the coast of Rivers State. The liability claim, though originating entirely in Nigerian waters, is processed in London. The premium, the claims reserve, and the legal fees, all billed in foreign currency, are paid to institutions with no local investment. What should be a learning moment for Nigeria's insurance and legal ecosystem becomes a footnote in a foreign ledger.

Since 2018, Nigeria has been estimated to have ceded over $4 billion in premiums to foreign insurers. That figure does not include the compounded opportunity cost of jobs uncreated, skills undeveloped, and institutions left unbuilt. It does not account for the additional value lost through advisory, litigation, or claims management—all of which are handled abroad, far from the jurisdictions where the risks originate.

This is not an abstract concern. It has tangible consequences for economic development, foreign exchange management, and national resilience. The maritime sector sits at the intersection of energy, security, and commerce. Its insurance systems should not be an afterthought.

Pushing the Local Content Agenda to the Finish Line

The push to localise P&I insurance is not just about compliance. It is about economic logic. Every other part of the oil and gas sector has undergone significant localisation, including vessel operations, maintenance, logistics, and safety management. Insurance should be next. And not just any insurance, but the high-value, high-impact insurance that governs liability and long-term exposure.

A locally domiciled P&I club does not have to replace foreign clubs overnight. It can start as a mutual or hybrid structure, supported by reinsurance and gradually building local capital and credibility. With support from NAICOM, NCDMB, and NIMASA, the regulatory pathway already exists. What's missing is momentum.

The regional implications could be transformative. Nigeria is already the largest shipping hub in West Africa and the primary maritime player in the Gulf of Guinea. If it succeeds in building a credible, indigenous P&I platform, it could eventually provide regional cover, supporting shipping operations in Ghana, Cameroon, and Senegal.

It could position Nigeria not just as a buyer of insurance services, but as a regional provider. Beyond economics, this would cement Nigeria's position as the regional centre for maritime risk. As trade corridors expand under AfCFTA, and Gulf of Guinea security challenges persist, a Nigerian-led P&I structure could offer the stability and proximity that global reinsurers and local operators both need.

The localisation of P&I insurance is a logical extension of Nigeria's existing content framework. It is aligned with policy. It is economically sound. And it is operationally possible.

The Local Content Act is not simply a compliance tool. It is an economic blueprint. It is time we used it to address the persistent gap in marine insurance, and by doing so, complete the loop of localisation in Nigeria's most strategic sector.

It's not too late to change course.

Originally published May 15, 2025

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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